conforming product suite guide/conforming product suite.pdf · 2020-06-25 · conforming product...

Conforming Product Suite

Version 10/01/19 Posted 07/24/20 of 59

Table of Contents

Table of Contents ..................................................................................................... 1

Product Description and Product Codes ....................................................................... 6

Overview ............................................................................................................. 6

Rights of FSM ....................................................................................................... 6

FRM Product Description ......................................................................................... 6

FRM Product Codes ................................................................................................ 7

Product Limitations – Investment and Second Homes ................................................. 9

ARM Product Description ........................................................................................ 9

ARM Product Codes – TEMPORARILY SUSPENDED (5/7/20) ......................................... 9

Loan Details .......................................................................................................... 10

Overview ........................................................................................................... 10

Assumable ......................................................................................................... 10

Borrowers .......................................................................................................... 10

Eligible States ..................................................................................................... 10

Escrow / Impound waiver ..................................................................................... 10

Energy Efficient Mortgages ................................................................................... 11

Price Adjustments ............................................................................................... 11

Loan Limits ........................................................................................................ 11

Minimum Loan Amount ........................................................................................ 11

Mortgage Credit Certificate ................................................................................... 11

Negative Amortization .......................................................................................... 11

Occupancy ......................................................................................................... 12

Prepayment Penalty ............................................................................................. 12

Property Types ................................................................................................... 13

Continued on next page



Table of Contents, Continued

Documentation Requirements .................................................................................. 14

FSM Requirements .............................................................................................. 14

General Underwriting Guidelines .............................................................................. 15

Overview ........................................................................................................... 15

Underwriting Method ........................................................................................... 15

Presentation ....................................................................................................... 15

Acceptable AUS Decisions ..................................................................................... 16

AUS .................................................................................................................. 16

Bankruptcy / Foreclosure ...................................................................................... 17

Condos .............................................................................................................. 17

Construction to Perm ........................................................................................... 17

Conversion of a Principal Residence ....................................................................... 18

Credit Score ....................................................................................................... 18

Down Payment Assistance / Grants ........................................................................ 18

Financial Reform – ATR/QM .................................................................................. 19

Gifts – 100% ...................................................................................................... 19

Homebuyer Education .......................................................................................... 19

Mortgage / Rental History ..................................................................................... 20

Mortgage Insurance ............................................................................................. 20

Mortgage Insurance – Lender Paid ......................................................................... 20

Multiple Mortgages to the Same Borrower ............................................................... 20

Public Assistance and/or Section 8 ......................................................................... 20

Purchase Contracts – Re-Negotiated ...................................................................... 21

Qualifying Ratios ................................................................................................. 21

Refinance Transactions ........................................................................................ 21

Reserve Requirements ......................................................................................... 21

Short Sales ........................................................................................................ 21

Subordinate (Secondary) Financing ........................................................................ 21





Restrictions ........................................................................................................... 22

High Cost and Responsible Lending Restrictions ....................................................... 22

State Restrictions ................................................................................................ 22

Conforming Fixed Rate Mortgage (FRM) .................................................................... 23

Summary ........................................................................................................... 23

Loan Parameters – Agency FRM 30 Year ................................................................. 23

Fannie Mae 97% Standard .................................................................................... 25

FSM-LPMI – Conforming FRM ................................................................................... 26

Summary ........................................................................................................... 26


Restrictions ........................................................................................................ 26

Split Mortgage Insurance ........................................................................................ 27

Summary ........................................................................................................... 27


Restrictions ........................................................................................................ 28

Subordinate Financing ......................................................................................... 28

Financed Mortgage Insurance .................................................................................. 29

Summary ........................................................................................................... 29


Restrictions ........................................................................................................ 30

Conforming Adjustable Rate Mortgages – TEMPORARILY SUSPENDED (5/7/20) ............... 31

ARM Summary .................................................................................................... 31

Presentation ....................................................................................................... 31

Guidelines .......................................................................................................... 31

HPML ................................................................................................................. 32

Product Disclosures ............................................................................................. 32

Qualifying Rate ................................................................................................... 32

Loan Parameters – Agency 30-Year........................................................................ 33





Fannie Mae HomeReady Mortgage® ......................................................................... 34

Summary ........................................................................................................... 34

Maximum Loan Limits .......................................................................................... 34

Loan Parameters – Standard HomeReady FRM 30 Year ............................................. 34

Product Guidelines ............................................................................................... 35

Freddie Mac Home Possible Mortgages® ................................................................... 39

Summary ........................................................................................................... 39

Maximum Loan Limits .......................................................................................... 39

Loan Parameters Standard Home Possible FRM 30 Year ............................................ 39

Product Guidelines ............................................................................................... 40

FSM Fannie Mae High Balance/Freddie Mac Super Conforming Mortgages ....................... 46

Summary ........................................................................................................... 46

FSM Loan Limits .................................................................................................. 47

High Balance and Super Conforming Requirements .................................................. 48

Multiple Financed Properties (5-10 Properties)............................................................ 50

Product Codes .................................................................................................... 50

Primary Residence ............................................................................................... 50

Second Home and Investment .............................................................................. 50

Delayed Financing .................................................................................................. 51

DU Loan Case Files: At least one Borrower has no credit score and another Borrower has a

credit score ........................................................................................................... 53

1 FICO Score ...................................................................................................... 53

LO & Pricing Requirements ................................................................................... 53

Opportunity for Elderly Parent(s) and Disabled Child ................................................... 54

Elderly Parent requirements .................................................................................. 54

Disabled Adult Child requirements ......................................................................... 54





Retail Specific Programs .......................................................................................... 55

Freddie Mac Direct ................................................................................................. 55

FSB Servicing Retained ........................................................................................... 56

Summary ........................................................................................................... 56

Loan Parameters ................................................................................................. 56

Piggyback Buster Program ....................................................................................... 57

Loan Parameters ................................................................................................. 57

Down Payment Assistance Programs ......................................................................... 59

IHDA ................................................................................................................. 59

Assist ................................................................................................................ 59

FHLB ................................................................................................................. 59



Product Description and Product Codes

Overview This product suite provides specific product-related criteria which are in addition to those guidelines provided in the Underwriting chapter of this FSM Guide.

✓ The product suite pertains to Retail, Wholesale and Modified

Correspondent channels Requirements that are specific to an individual channel will be

noted ✓ Should there be a conflict between the requirements contained in this

product suite versus the guidelines contained in the Underwriting Chapter, FSM will follow the criteria set forth in this product suite.

✓ FSM should reference the Underwriting chapter for guidelines not specifically addressed in this product suite.

✓ Additionally, First State Mortgage Services, LLC (FSM) underwriting guidelines are based on Fannie Mae/Freddie Mac guidelines, unless

specifically addressed in this product suite or the Underwriting chapter.

Rights of FSM FSM reserves the right to change or eliminate any product without advance notice

based on the current market conditions.

✓ If a product is not priced, it is not available.

FRM Product

Description Conforming Fixed Rate Mortgage

✓ The Conforming fixed rate mortgage (FRM) product has the option of a

10-, 15-, 20, 25, or 30-year amortization term.




Product Description and Product Codes, Continued

FRM Product Codes

The following matrix outlines the applicable product codes for the Conforming FRM product suite:

Note:

✓ All product codes may not be listed herein

✓ Verify the product code on the daily rate sheet ✓ If a published product is not priced, it may not be available, contact

Pricing.

Product Product Code Loan Term

Conforming Fixed Rate Mortgage – Fully Amortizing

30-Year FRM 300000 30-Years

30-Year FRM – DU High Balance 300017 30-Years




15-Year FRM – DU High Balance 150017 15-Years


100% Gift 300009 30-Years

FSM Lender Paid Mortgage Insurance Option (LPMI) - FRM

30-Year LPMI-FRM 300001 30-Years

30-Year Piggyback Buster 300052 30-Years


25-Year Piggyback Buster 250052 25-Years








FRM Product Codes, continued

Product Product Code Loan Term

Split Mortgage Insurance Option (MI) - FRM

30-Year Split MI 300002 30-Years





✓ See the Rate Sheet for Upfront and Monthly MI factors

Freddie Mac HomePossible®/Home Advantage®

30-Year HomePossible 300036 30-Years

Fannie Mae HomeReady®

30-Year HomeReady 300053 30-Years





Product Limitations –

Investment and Second Homes

When Borrowers are purchasing a Second Home or Investment Property:

✓ If the Borrower(s) own more than one financed 1-4-unit investment property, the product is limited to 15-year, 20-year, 30-year FRM or 7/1

or 10/1 ARM only.

ARM Product Description

Conforming Adjustable Rate Mortgage

The Conforming Adjustable Rate Mortgage (ARM) product has only a 30-Year

amortization, but offers the following options:

✓ 5/1, 7/1 and 10/1

ARM Product

Codes – TEMPORARILY SUSPENDED (5/7/20)

The following matrix outlines the applicable product codes for the Conforming ARM

product suite:

Note:

✓ Verify the product code on the current daily rate sheet;

✓ If a published product is not priced, it may not be available, contact

Pricing

Product DU Product

Code

LPA Product

Code Loan Term

Conforming Adjustable Rate Mortgage (ARM)

5/1 LIBOR 510011 510012

30-Year

Amortization 7/1 LIBOR 710011 710012

10/1 LIBOR 910011 910012



Loan Details

Overview The following “loan details” are presented in alphabetical order. Unless otherwise

noted in a specific product sub-section, the loan details noted herein apply to all

loans in this product suite.

See the specific product sub-sections for full details regarding loan parameters.

Assumable Conforming FRM – Not assumable

Conforming ARM – May be assumable under specific conditions. See ARM

Summary

Borrowers See the Underwriting Chapter for Eligible Borrowers

Eligible States See the states in which FSM is able to accept loans on the website at this link:

FSM Eligible States; See FSM State-Specific Guidelines for product/lending

restrictions in these states.

✓ The Seller must be fully licensed or legally exempt to originate loans in

the state

Escrow / Impound waiver

Permitted per FSM guidelines for conventional loans with an LTV less than

80.00%, unless higher limits are permitted by state law (e.g. CA where waiver is

permitted to 89.99%; LTV’s > 90.00% requires escrows).

✓ The impound/escrow for hazard insurance and taxes may be waived;

✓ The impound/escrow for mortgage insurance may not be waived;

✓ The impound for hazard insurance only may be waived. The impound for

taxes only may not be waived.

✓ See Underwriting for additional details. See the Current rates for

applicable price adjustments;

✓ If the loan is HPML, the loan requires escrows, regardless of the LTV

and/or state laws;

✓ After January 1, 2016, any loan designated in an A or V flood zone must

have an escrow established for flood insurance irrespective of LTV


http://www.msiloans.biz/Seller%20Guide/Matrix/Mod%20Corr%20Eligible%20States.pdf



Loan Details, Continued

Energy

Efficient Mortgages

FSM does not accept mortgages which are subject to any type of “special” “EEM

mortgage” program(s) or guidelines.

Price Adjustments

Price adjustments may be applied against conventional conforming loans. All price

adjustments are cumulative.

See the Current rates on http://www.msiloans.biz/index.html for details.

Loan Limits Maximum Loan Amount for Conforming Products – 2020

Property Type 48 Contiguous States & DC

1 Unit $510,400

2 Units $653,550

3 Units $789,950

4 Units $981,700

Minimum Loan

Amount FSM will not accept mortgage loan amounts less than $20,000.00

Mortgage Credit Certificate

Mortgage Credit Certificate (MCC) is permitted in the Retail business channel.

Negative

Amortization Not applicable or allowable for any offered product.


http://www.msiloans.biz/index.html




Occupancy Within specific product parameters, the following occupancy types are available:

✓ Owner-occupied

✓ Second vacation home

✓ Investment (non-owner occupied)

✓ See the Underwriting chapter for additional details

Prepayment Penalty

Not Permitted




Property Types

The following matrix outlines the applicable property types:

Eligible Property Types Ineligible Property Types

Unless otherwise specifically restricted or

not permitted by the applicable loan

parameters, the following property types

are acceptable to FSM/Agency Guidelines:

✓ 1-4 Unit Properties

✓ Condominiums (condo) to FSM

guidelines, regardless of AUS

findings. See Underwriting/Condo

requirements for details

✓ Land contract for sale

✓ Leasehold Estate properties must

be common to the area. See

Underwriting/Leasehold for full

details

✓ Modular/Factory Built homes to

Fannie Mae guidelines. See

Underwriting/Modular Homes for

full details

✓ PUDs to applicable agency

guidelines

✓ Rural Properties

✓ Mixed use properties (see

Underwriting for details)

✓ Auction-Properties purchased at

auction – See

Underwriting/Property Types for

exception

✓ Commercial operations

✓ Condotels

✓ Cooperative Projects

✓ Geodesic domes

✓ Earth homes

✓ Houseboats

✓ Mobile(manufactured)homes,

single or double-wide

✓ Model home leaseback properties

✓ Multi-dwelling or Multi-Unit

condos

✓ Non-conforming zoning projects

✓ Non-warrantable condos

✓ Timeshare/segmented ownership

✓ Projects with pending litigation

✓ Properties with deed restrictions

that limit transferability of title or

contain a “first right of refusal”

provision

✓ Properties located outside the

contiguous United States; US

Territories; and any property

located in a state where FSM does

not lend

✓ Properties with assignments of

purchase (assigning the purchase

contract to another party)

✓ Property located on an Indian

reservation

✓ Unimproved (raw) land

✓ Working farms, ranches or

orchards

✓ Any property type not permitted

by Fannie Mae or Freddie Mac

Note: See Underwriting/Property Types for additional details and State Restrictions for

any lending restrictions.



Documentation Requirements

FSM Requirements

FSM adheres to the AUS findings and requires the following minimum

documentation on all loans:

✓ Income

The initial VVOE

Closing Verbal VOE must be done within 10 days of settlement

A current YTD pay stub reflecting a minimum 30 day’s earnings,

And

W-2 and/or Tax returns, as applicable

✓ Assets

FSM requires a copy of the 2 most recent consecutive bank statements to validate funds to close and/or reserves, regardless

if a VOD is included in the loan file

Large deposits see Underwriting/Assets

Note: FSM still requires the 4506-T signed/dated by each Borrower for personal

and each business entity at underwriting to facilitate Underwriting review. FSM Underwriting conditions for the 4506-T’s to be signed at closing to facilitate post-

funding quality audit/review.



General Underwriting Guidelines

Overview The conforming loans in this section require submission through either Fannie Mae

Desktop Underwriter® (DU) or Freddie Mac Loan Product Advisor® (LPA). The underwriting guidelines (AUS findings) of each agency must be met, unless

otherwise indicated in the loan parameters.

All loans must meet the guidelines outlined in this General Underwriting

Guidelines section unless otherwise noted in a specific product sub-set.

Note:

✓ Throughout the product suite references to the Underwriting chapter are indicated in the following manner: Underwriting/Credit – this tells you to

go to the Underwriting chapter, Credit section. References in blue with an underline indicate a link within this chapter, click on the link to go to that

reference.

✓ Guidelines that are not provided in this product suite or in the Underwriting chapter default to the applicable Fannie Mae or Freddie Mac

guidelines

Underwriting

Method Conforming Conventional

✓ AUS required

Loans must be submitted through either Fannie Mae DU or Freddie

Mac LPA and receive an Approve or Accept to be eligible to FSM

✓ Validation

Loans must be validated by an underwriter in accordance with the

applicable agency requirements

Note:

Loans may not be manually underwritten under any circumstances.

Presentation The guidelines in this section are presented in alphabetical order




General Underwriting Guidelines, Continued

Acceptable

AUS Decisions FSM will accept Agency Conforming loans only with the following credit

recommendations.

Note: Manual Underwriting or “Overturning” loans is not permitted regardless of circumstances or compensating factors. Excessive submissions or manipulation of

the AUS system is not acceptable.

Credit Recommendation Eligible for FSM

DU Decision

DU Approve/Eligible Yes

DU Approve/Ineligible No (except for statutory increase in

loan amount)

All other DU Recommendations No

LPA Decision

Standard Accept Yes

Streamline Accept Yes

Caution No

Note:

✓ A copy of the final AUS findings report and completed Fannie Mae 1008

must be in the loan file at time of submission to underwriting

✓ The report/findings must be the most current used to close the loan and

may not be older than 120 days from the date of closing (Note date).

✓ The AUS findings summary and executed Fannie Mae 1008 must reflect

the terms of the closed loan and final 1003

AUS Loans may not be manually underwritten

✓ All conventional conforming loans must be submitted to either DU or LPA

Excessive Submissions

✓ FSM will not close loans with an “Excessive Submission” message in the

DU or LPA findings

✓ When you send loans to FSM for underwriting, ensure that you do not “manipulate” the data with multiple submissions; if the “Excessive Submission” warning/message appears when FSM submits for final

approval, the loan is not eligible for close by FSM.





Bankruptcy / Foreclosure

See the Underwriting Chapter/Credit/Bankruptcy for full details regarding

guidelines and documentation requirements.

Condos FSM will accept loans where the subject property is a Condo.

✓ The condo must meet all current FSM/Fannie Mae/Freddie Mac guidelines.

See the Seller Guide/Underwriting Chapter/Condo for full details.

Condos may be submitted to DU or LPA

✓ FSM requires that Questionnaires be completed as required

✓ Ineligible Project List

For all conforming condo loans, regardless of AUS findings, FSM

must validate that the condo is not included on any Ineligible

Project list.

✓ Florida Condos that are primary, second home or investment, if using a streamline review then the LTV must be reduced by 5%; if using a full

condo review LTV can remain.

Additional Note:

✓ Loans must be identified as a condo at time of lock. Failure to do so may

change pricing and also may delay underwriting decision

✓ FSM will not submit condos for full Fannie Mae Approval, nor PERS, nor

CVAS.

Construction to Perm

✓ Construction to Perm loans, as two separate transactions only, are

permitted.

✓ See Underwriting/Construction to Permanent Financing and New

Construction in the Underwriting chapter for additional assistance





Conversion of a Principal Residence

✓ For all conforming loans, when converting the departure residence to an

investment property rental or retaining as a second home:

If converting current principal residence to a second home, reserves as determined by the AUS and the full payment (PITI)

must be included in the back ratio for qualifying

If converting current principal residence to a rental/investment

property: an executed lease and documented market rent schedule is required. Lesser of lease or market rent will be used

for the offset calculation

✓ The lender will require a copy of the security deposit, 1st month rent

received and proof of deposit;

✓ Rental income from an interested party to the transaction is not allowed;

✓ Form 1007/Form 216 will be required to determine fair market rent. Gross

rents will be determined by the lease or 1007/216, whichever is less;

✓ The standard financial reserve requirements when the Borrower converts

current principal resident to an investment property must be applied. See B3-3.1-08: Rental Income (08/07/2018) FNMA 5306.1 Rental Income

FHLMC

Credit Score Minimum score required by FSM, regardless of DU/LPA, see the specific loan

parameter matrices for details.

Important Reminder: Regardless of the FSM minimum FICO, if the AUS or an MI company requires a higher FICO minimum, the loan must comply with the more

restrictive guidelines.

Disputed Credit and Authorized User Accounts – See Underwriting/Credit

Down Payment

Assistance / Grants

FSM may permit the use of Down Payment Assistance (DPA) programs or Grants as Down Payment, regardless of who funds the DPA or Grant. Loan must be

registered with the accurate CLTV.


https://www.fanniemae.com/content/guide/selling/b3/3.1/08.html

http://www.freddiemac.com/singlefamily/guide/

http://www.freddiemac.com/singlefamily/guide/




Financial Reform – ATR/QM

FSM will accept only those loans that meet the Consumer Protection Financial Board Qualified Mortgages/Ability to Repay (QM/ATR) guidelines published in the

final rule. See Underwriting/CFPB for full details.

Gifts – 100% ✓ Permitted for Fannie Mae DU/Freddie Mac LPA Approve/Eligible loans with

an LTV 80.01% - 97.00%

✓ Allowable for Conforming and High Balance

Requirements:

✓ FSM will accept a Gift for 100% of the down payment; no minimum

Borrower contribution is required.

✓ For this “100% Gift Program” FSM will accept the following donors:

Parent/Stepparent

Any blood relative

A domestic partner or fiancé

An employer with an established employee assistance program

✓ The gift must be documented to the more restrictive of AUS findings or

FSM published requirements.

Note: A spouse or domestic partner’s funds, who has resided with the Borrower

prior 12 months and will occupy the subject property, can be used as Borrower’s

funds to close with the attestation of residency, prior and future, along with

relationship to the Borrower, are not considered gift funds.

✓ Additionally, the following product guideline requirements must be met:

Subject to final MI approval

Property must be a single unit, primary residence

Non-occupant Co-Borrowers are not permitted on 97%

Minimum FICO 620

Maximum DTI 50% without DPA

LPMI is available

Homebuyer

Education Purchase transactions with LTV, CLTV or HCLTV ratios greater than 95% when all

Borrowers are first-time homebuyers.

✓ See HomeReady and Home Possible for additional guidelines





Mortgage / Rental History

Unless otherwise noted in a specific product sub-set, FSM will not accept any conventional loan for which the mortgage history shows more than 2

mortgage late payments in the past 12-months (FSM accepts 2x30 in the past 12

months).

✓ FSM always requires a mortgage payment history for any mortgage (reporting or not) for the past 12-months, unless held for less time. If the current mortgage has been held for less than 12 months the following

applies:

If the Borrowers are previous homeowners, the previous mortgage history is required to provide a minimum 12-month

mortgage history, or the previous duration of ownership

If the Borrower’s did not previously own a home, FSM

accepts the previous rental history as required by the AUS

findings. Not required if not reflected in the AUS findings.

Mortgage Insurance

See Underwriting, Mortgage Insurance Requirements for details.

Mortgage Insurance – Lender Paid

See FSM-LPMI-Conforming FRM for details

Multiple

Mortgages to the Same Borrower

FSM applies the following limitations to Borrowers that hold multiple financed

properties (See 5-10 Financed Properties).

Public

Assistance and/or Section 8

FSM will accept public assistance and/or Section 8 assistance in accordance with

current Fannie Mae or Freddie Mac guidelines.

However, FSM requires that all housing payments must be made directly to the servicer by the Borrower; payment plans that provide for the assistance providers

to make payments to the servicer to supplement the Borrower’s housing

payments are not acceptable under any circumstances.





Purchase Contracts – Re-Negotiated

Please see the Underwriting chapter, Property/Purchase Agreement (Contract)-Re-Negotiated for details regarding FSM’s restrictions for re-negotiated purchase

contracts. Once appraisals have been uploaded to the agency portals, no alterations or changes to the purchase price are allowed except for a valuation

below the purchase price.

Qualifying

Ratios As determined by DU/LPA/MI restrictions or the specific product limitations.

✓ The more restrictive guidelines for any product prevail

Refinance Transactions

Follow current applicable more restrictive of agency/FSM requirements for

refinance loans.

✓ See Underwriting/Refinance for full details

✓ Minimum 640 FICO score required for cash out

May do 620 if LTV is 60% and below

Note:

Cash out refinances are not permitted on primary (homestead) residences in the

state of Texas.

Reserve Requirements

FSM requires that all conventional loans receive an Accept or Approve decision

from either DU or LPA

FSM will align with Fannie Mae/Freddie Mac reserve requirements.

Short Sales See the Underwriting chapter/Short Sales for specific restrictions/guidelines. Short

sales and/or Deed in lieu of foreclosure have a minimum 4 years from consummation/finalization. The exception is 2 years with a documented

“extenuating circumstance”. Note: Divorce is never an extenuating circumstance.

Subordinate

(Secondary) Financing

Must meet the product-specific loan parameter requirements.

✓ As required by the product parameters, subordinate financing is permitted

and must meet the more restrictive of FSM/Agency (DU/LPA) guidelines

FSM will not accept Employer seconds or seller seconds.

Community seconds only per specific product allowance.

✓ Home Equity Lines of Credit (HELOC) must meet the applicable agency

guidelines.

See Underwriting/Subordinate Financing for details




Restrictions

High Cost and Responsible Lending

Restrictions

FSM high cost policy will conform to all Federal, State, County, City, and Agency

requirements, including consumer laws per the CFPB.

No loan sold may violate high cost regulations as set forth by the above-

mentioned entities.

State Restrictions

FSM accepts loans on properties located only in specifically approved States. See Eligible States for full details. The matrix below outlines additional geographic

restrictions applied by FSM.

State FSM State-Specific Guidelines

All

✓ FSM product or underwriting guidelines and/or restrictions do

not supersede any more restrictive regulatory, state or local

requirements;

✓ Seller is responsible to ensure that each loan originated,

underwritten and closed is in full compliance with all

regulatory, state or local guidelines and/or restrictions

Florida

✓ Properties in Broward & Miami/Dade Counties not permitted

✓ High Balance loans are not permitted

✓ Condos: Primary Residence – Established Only/No new

projects

CPM/Limited Review = 75%

Existing PERS = 95%

✓ Condos: Second Home – Established Only/No new projects

CPM/Limited Review = 70%

Existing PERS = 90%

Ohio

The Seller must warrant that each loan secured by property located in

Ohio, irrespective of the originating lender’s exempt status under the

Ohio Consumer Sales Practices Act, relies on full verified documentation

of the Borrower’s financial resources to determine the Borrower’s

probability of repayment. FSM requires that all supporting

documentation used by the originating lender to analyze the probability

of repayment at time of origination be included in the delivered

mortgage loan file.

Texas Cash Out Refinance loans for primary (homestead) properties are not

acceptable for purchase

http://www.fsmloans.biz/Seller%20Guide/Matrix/Eligible%20States.pdf

http://www.fsmloans.biz/Seller%20Guide/Matrix/Eligible%20States.pdf



Conforming Fixed Rate Mortgage (FRM)

Summary FSM’s Conforming FRM products are the “standard” Fannie Mae/Freddie Mac

products offered through the applicable Automated Underwriting System (AUS).

✓ The loans must be underwritten using either DU or LPA

✓ More restrictive parameters may apply. All loans must meet FSM loan parameters noted herein to be eligible for approval, regardless of the AUS

finding.

Loan

Parameters – Agency FRM 30 Year

✓ AUS: Approve/Accept required

✓ DTI: Maximum DTI is 50% with AUS Approve/Accept. All loans must

comply with QM/ATR guidelines which may results in a lower DTI despite

the AUS or the most restrictive of MI and specific product limitations

✓ See State Restrictions for additional restrictions

✓ Texas Section 50(a)(6) (True Texas Cash Out) loans are not permitted




Conforming Fixed Rate Mortgage (FRM), Continued

Standard Conforming Fixed (Rev 09/25/19)

Purpose # Units Min Fico DU LPA

LTV CLTV LTV CLTV

Primary Residence

Purchase & Rate/Term Refi

1 620 95 95 95 95

1 620 70 70 70 70

2 620 85 85 85 85

3-4 620 75 75 80 80

Cash Out Refi 1 620 60 60 60 60

1 640 80 80 80 80

2-4 640 75 75 75 75

Second Home


1 640 90 90 90 90

Cash Out Refi 1 640 75 75 75 75

Investment Property

Purchase 1 660 85 85 85 85

2-4 680 75 75 75 75

Rate/Term Refi 1 660 75 75 85 85

2-4 680 75 75 75 75

Cash Out Refi 1 680 75 75 75 75

2-4 680 70 70 70 70

✓ Investment Property: Max LTV of 80% on Condos




Conforming Fixed Rate Mortgage (FRM), continued

Fannie Mae 97% Standard

✓ Standard purchase transaction

First Time Homebuyer: an individual is to be considered a first-

time homebuyer:

▪ Is purchasing the security property

▪ Will reside in the security property as a principal residence

▪ Had no ownership interest (sole or joint) in a residential

property during the three-year period preceding the date of the purchase of the security property. Note: an individual who is a displaced homemaker or single parent will also be considered a first-time homebuyer if he or she

had no ownership interest in a principal residence (other than a joint interest with a spouse) during the preceding

three-year time period.

Desktop Underwriter® (DU) underwriting required

Approve/Eligible required

Reserves (if required per DU) may be gifted

Home Buyer Education is not required for Fannie Mae; however,

you must be in full compliance with CFPB

Standard contribution requirements apply

Standard Conforming loan amounts only

All loans must be fixed rate

Secured by a one-unit principal residence

35% Standard Mortgage Insurance only, no reduced MI permitted:

Monthly MI only.

Fannie Mae 97% Standard (Rev 09/25/19)

Purpose # Units Min FICO DU LPA

LTV CLTV LTV CLTV

Primary Residence

Purchase 1 620 97 97 N/A N/A

✓ Fannie 97: Borrower required to be First Time Homebuyer



FSM-LPMI – Conforming FRM

Summary Loans with a fixed interest rate and payment for the life of the loan are eligible for

the FSM Lender Paid Mortgage Insurance (LPMI).

FSM-LPMI provides pricing that enables Lender Paid MI to be added to the loan by

FSM.

✓ The Borrower “pays” for the mortgage insurance in the loan interest rate

✓ FSM Loan Limits apply

✓ See the Current rates on http://www.msiloans.biz/index.html for pricing

details

Mortgage Insurance

MI Requirements

✓ Standard coverage applies

✓ The cost of the MI cert is included in the loan pricing for LPMI

Restrictions Appraisal:

✓ A full appraisal is required

Appraisal waiver may be permitted with MI Company approval

High Balance:

✓ Not permitted

Underwriting:

✓ DU/LPA Approve or Accept are required

✓ Available only when priced on the Rate Sheet as LPMI

✓ Decision by the mortgage insurer may supersede and a lower DTI or a

higher FICO may be required. The MI decision is final.

✓ Amortization terms greater than 30-years are not permitted for LPMI

Please Note: All loan parameters and requirements are governed by the

applicable MI company and are subject to change without notice. If the MI

company will not issue a Certificate, the loan is not eligible.




Split Mortgage Insurance

Summary Loans with a fixed interest rate and payment for the life of the loan are eligible for

Split Mortgage Insurance (MI).

Split MI provides an MI premium alternative that reduces the monthly cost of the

MI premium for the Borrower.

The premium is split into an upfront fee, paid at closing by the Borrower or the property seller (within allowable Seller Contributions), with a reduced monthly

premium paid by the Borrower beginning with the first payment due.


Note: See the Current rates on http://www.msiloans.biz/index.html for pricing

alternatives

Mortgage Insurance

MI Requirements:

✓ Standard Coverage is required, see MI Standard Coverage

Reduced mortgage insurance is not permitted, regardless of the

AUS findings

✓ Proper MI disclosure must be made to the Borrower

Evidence that the proper MI disclosures were issued is required in

the delivery file

✓ FSM orders the MI

Important Note: Loan parameters are dictated by the MI company and are

subject to change without prior notice.





Split Mortgage Insurance, Continued



Appraisal waiver may be permitted with MI company approval

High Balance:

✓ Not permitted

Underwriting:

✓ In all instances where the MI guidelines are more restrictive, they

supersede FSM guidelines

✓ DU/LPA Approve or Accept are required

✓ If the MI Premium is property Seller paid, the Underwriter must validate

that the cost is within Seller Contribution limits

Subordinate Financing

Not Permitted.



Financed Mortgage Insurance

Summary The MI premium is included as part of the principal amount of the Mortgage

(financed premium). The entire Borrower purchased mortgage insurance premium

is included in the loan amount.


✓ See the Current Rates on http://www.msiloans.biz/index.html for pricing

alternatives

Mortgage Insurance

MI Requirements:

✓ Standard Coverage is required, see MI Standard Coverage

✓ Fixed Rate

✓ 1-unit property, principal residence or 2nd home

✓ Loan amount includes financed mortgage insurance premium cannot

exceed maximum conforming loan limits

✓ Special LTV Calculations:

Base LTV ratio: LTV ratio calculated using the Mortgage amount

without financed MI premium

Gross (higher) LTV ratio: LTV ratio calculated using the Mortgage amount that includes financed MI premium. Gross LTV

must not exceed 97%

Note: the original loan amount of the mortgage plus the amount

of any financed mortgage insurance premium may not exceed the maximum original loan limits provided in Fannie Mae or Freddie

Mac Guides.

Important Note: Loan parameters are dictated by the MI company and are

subject to change without prior notice.





Financed Mortgage Insurance, Continued



Appraisal waiver may be permitted with MI company approval

High Balance:

✓ Not permitted

Underwriting:

✓ Cash out refinance loans are not permitted

✓ 2-4-unit properties are not permitted

✓ Investment properties are not permitted

✓ In all instances where the MI guidelines are more restrictive, they

supersede FSM guidelines

✓ DU/LPA Approve or Accept are required.



Conforming Adjustable Rate Mortgages –

TEMPORARILY SUSPENDED (5/7/20)

ARM Summary The following products are adjustable rate mortgages (ARM) that allow for a

changing rate/payment over the life of the mortgage.

Products included herein are:

Fully Amortizing Conforming ARM Products

Product Margin Adjustment Caps Rate Fixed

for (1)

Conversion

to FRM? Assumable

1st Annual Lifetime

5/1 2.25% 2 2 5 60 months No After the initial fixed rate period

7/1 2.25% 5 2 5 84 months No

10/1 2.25% 5 2 5 120 months No

Note: ✓ Index – 1 Year LIBOR: The one-year London Interbank Offered Rate (“LIBOR”) which is the

average of interbank offered rates for one-year U.S. dollar-denominated deposits in the

London market, as published in The Wall Street Journal. The most recent Index figure available as of the date 45 days before each Interest Change Date is the current rate.

✓ Floor: Margin – the rate will never be lower than the Margin. The minimum rate is 5% below

the Note rate, but never less than the Margin on the loan. ✓ Assumable: Subject to credit approval

✓ Interest rate is fixed at close for the period note, at the end of which time the rate changes annually thereafter.

Presentation This product subset will provide the “common” product guidelines that apply to

Conforming ARM loans.

Guidelines Unless otherwise specifically noted in this product subset, the Conforming ARM

products are subject to the following:

✓ See Loan Limits for product minimum and maximum loan amounts

✓ Applicable DU/LPA guidelines and requirements

✓ FSM Conforming product guidelines

✓ See the Underwriting chapter for topics not addressed in this product

suite.




Conforming Adjustable Rate Mortgages – TEMPORARILY SUSPENDED (5/7/20), TEMPORARILY SUSPENDED (5/7/20) Continued

HPML 5/1 ARM loans that fail the HPML test are not eligible for FSM

Product

Disclosures ARM disclosures are required in accordance with any federal, state, jurisdictional

or regulatory requirements.

Qualifying

Rate

ARM Products Qualify at…

5/1 Greater of:

The fully indexed rate or

The Note Rate +2.0

7/1, 10/1 Greater of:

Note Rate, or

Fully indexed rate

Important Note:

✓ Fully indexed rate is defined as the index plus the margin as entered into

DU or LPA. FSM qualifying rates apply regardless of AUS used.

✓ For DU: to calculate the fully indexed rate, the user must input the Index

and Margin into DU.

Failure to input the Index and Margin into DU will result in an “ineligible” finding and loans with an “ineligible” finding are not

eligible for FSM

✓ For LPA: If LPA does not calculate using the higher of the Note rate or Fully indexed rate, the user must input the correct qualifying rate or

calculate manually.




Conforming Adjustable Rate Mortgages – TEMPORARILY SUSPENDED (5/7/20), TEMPORARILY SUSPENDED (5/7/20) Continued

Loan Parameters –

Agency 30-Year

✓ DTI: Maximum DTI is 50% with AUS Approve/Accept. All loans must comply with QM/ATR guidelines which may result in a lower DTI despite

the AUS

✓ See State Restrictions for additional restrictions

✓ Texas Section 50(a)(6) (True Texas Cash Out) loans are not permitted

Standard Conforming ARM’s (Rev 09/25/19)

Purpose # Units Min Fico DU LPA

LTV CLTV LTV CLTV

Primary Residence


1 640 95 95 95 95

2 640 85 85 85 85

3-4 640 75 75 80 80

Cash Out Refi 1 640 80 80 80 80

2-4 640 75 75 75 75

Second Home


1 640 90 90 85 85

Cash Out Refi 1 640 75 75 75 75

Investment Property

Purchase 1 680 75 75 80 80

2-4 680 75 75 75 75

Rate/Term Refi 1 680 75 75 75 75

2-4 680 75 75 75 75

Cash Out Refi 1 680 75 75 75 75

2-4 680 70 70 70 70

✓ Investment property: Max LTV of 75% on Condos



Fannie Mae HomeReady Mortgage®

Summary Fixed Rate, fully amortizing Purchase and Limited Cash Out Refinance (LCOR)

product for Primary Residence only.

✓ Offered by Fannie Mae for low-to-moderate income Borrowers who need a

low-down payment and credit flexibility

✓ Loans must be in full compliance with Fannie Mae for HomeReady

Mortgage® loans and must meet FSM requirements unless specifically

addressed herein.

✓ Product Code: 300053

Maximum Loan Limits

✓ Standard conforming loan limits only

✓ High Balance loans are not allowed

Loan Parameters – Standard

HomeReady FRM 30 Year

✓ Community second subordinate financing permitted/new or existing

✓ All loans are subject to MI approval; If MI approval cannot be obtained,

the loan is not eligible

✓ Purchase and LCOR transactions only

✓ LCOR max LTV 95%

✓ Non-Occupant Co-Borrower max LTV 95%

✓ CLTV up to 105% with Eligible Community Seconds

HomeReady – Conforming Fixed (Rev 09/25/19)

Purpose # Units Min FICO

DU

Min Down Payment

% of Min DP Req. from Borrower Personal

Funds

LTV CLTV

Primary Residence

Purchase

1 640 97 97 3% 0%

1 620 95 95

2 640 85 85 15% 3%

3-4 640 75 75 25% 3%

LCOR

1 620 97 97 N/A N/A

2 640 85 85 N/A N/A

3-4 640 75 75 N/A N/A




Fannie Mae HomeReady Mortgage®, Continued

Product Guidelines

The following matrix provides the HomeReady Mortgage® Guidelines with FSM overlays. All loans must meet the more restrictive of FSM or Fannie Mae

guidelines.

Topic Fannie Mae HomeReady Requirements

Amortization 30-year terms only

Appraisal Appraisal subject to AUS and MI requirements

ARM features Not applicable

Assets As required by DU

Assumable No

ATR/QM All HomeReady Mortgage® loans must meet the ATR/QM guidelines

AUS DU Approve/Eligible

Borrower

Eligibility

✓ FSM eligible Borrower(s)

✓ Inter-Vivos Trust allowed ✓ Non-occupant Co-Borrower(s) are permitted but income goes into the AMI

calculation ✓ Trailing Spouse income not permitted

✓ Occupying Borrower(s) may only own a total of two financed residential properties, including the subject property, as of the Note Date. Financed

properties owned by Non-occupant Borrower(s) do not have to be

included.

Borrower Income

Eligibility

✓ 80% AMI*

✓ When determining whether a mortgage is eligible under the Borrower income limits, lenders must count the income from any Borrowers listed on the mortgage Note whose income is considered in evaluating creditworthiness for the mortgage loan

Note: Area Median Income (*AMI) Source = FHFA; https://homeready-eligibility.fanniemae.com/homeready/

Condos Eligible condos are allowed. See State Restrictions

Contributions Contributions by interested parties are permitted

LTV/TLTV >90% 3% of the lesser of sales price or appraised value

✓ Financing concessions may not exceed the actual costs for Closing costs, Financing costs and Prepaids/Escrows

LTV/TLTV>75%&<90% 6% of the lessor of sales price or appraised value

LTV/TLTV < 75% 9% of the lessor of sales price or appraised value

Documentation Standard documentation. Adhere to AUS


https://homeready-eligibility.fanniemae.com/homeready/





DTI/Ratios Regardless of AUS Approval, Max 50%; subject to MI approval

Escrows Escrow accounts are required for all loans with LTVs greater than 80% ✓ Properties located in the state of California may waive escrows up to but

not greater than 89.99% LTV

Escrow Holdback See UW Guide for acceptable weather-related items

FICO See HomeReady loan parameters table

Funds to Close Down Payment for Purchase

Borrower Personal funds and other Borrower funds only Closing Costs/Financing Costs/Prepaids/Escrows

Borrower personal funds and Other Borrower funds and Flexible sources of funds

Note: Cash-on-hand and Sweat Equity are not permitted

Funds Defined Borrower Personal Funds – fully sourced and defined as: ✓ Funds on deposit in the Borrowers checking, saving, money market or

certificate of deposit account or other depository account

✓ Proceeds of a loan fully secured by the Borrowers own tangible assets ✓ Proceeds from the sale of a Borrowers tangible assets

Other Borrowers Funds – fully sourced and defined as: ✓ Gifts from a related person per FSM guidelines

✓ Grants and Community Seconds ✓ Any eligible loan may have more than one Community second

Flexible Sources of Funds – fully sourced and defined as: ✓ Seller concessions per Fannie guidelines

✓ Premium pricing per Fannie guidelines Note: Flexible Sources of Funds may be used ONLY for Closing costs/Financing

Costs/Prepaids/Escrows

Geocode DU will geocode the property address for eligibility and a new additional screen

field will allow for entering census tract information if DU is unable to geocode the subject property address. Note: The FIPS code is not required, but it can be used if DU is unable to

determine the census tract. When the FIPS code is provided, DU uses that census tract to determine the AMI to be used in the income eligibility determination.






Home Buyer Education

For purchase transactions, when all occupying Borrowers are first-time homebuyers and regardless of the LTV ratio, must participate in a homeownership

education program before the Note date. ✓ Must be provided by Framework, the online program approved by FNMA ✓ Home - Framework Homeownership

✓ If Borrowers have a disability, lac of Internet access, or other issues where they would be better served through other education modes, Borrowers are to call Framework’s toll-free number where they can be

directed to a HUD approved counseling agency that can meet their needs Note:

✓ Underwriting will not review loan files if the Homebuyer Education Certificate is not included in the underwriting submission

✓ Borrowers will have access to post-purchase homeownership support for the life of the loan through Framework’s homeownership advisor service

Income and Census Tract Eligibility

Based on the census tract and Borrower income, DU will notify users when a casefile appears to be eligible for HomeReady, but the lender has not underwritten the loan casefile as HomeReady. Resubmit the loan as a HomeReady

loan to obtain the appropriate HomeReady messaging. New additional data screen field will allow entering census tract information if DU is unable to geocode the property address.

✓ All HomeReady mortgages must be submitted to DU

✓ DU will determine income eligibility, qualifying ratios and reserves

Max ratio is 50% regardless of AUs ✓ Rental income on all 2-4-unit properties allowable per FNMA rental income

guidelines.

Mortgage

Insurance – Fixed Rate Term >21 years

LTV Coverage Req.

Note: Standard MI Required ✓ Borrower paid monthly permitted

✓ LPMI options available ✓ Custom, Reduced, Split premium

or Financed MI not permitted

90.01-97.00% 25%

85.01-90.00% 25%

80.01-85.00% 12%

Mortgage Insurance – Fixed Rate Term

<20 years

LTV Coverage Req.

90.01-97.00% 25%

85.01-90.00% 12%

80.01-85.00% 6%

Non-Occupant

Borrowers

Permitted on 1-unit Primary Residence

Occupancy Primary Residence

Property Eligibility

1-4 Unit Primary Residence ✓ Fannie Mae eligible Condos are permitted

✓ PUDs are permitted ✓ No cooperatives ✓ No Manufactured Housing


https://homeready.frameworkhomeownership.org/





Reserves Reserves as determined by AUS

Subordinate

Financing

Community seconds are allowable

Note: Underwriting must approve any Community Second prior to Closing

Transaction Type Purchase and Limited Cash Out Refinance (LCOR)

FSM also has the following product overlays/exclusions:

✓ Buy-downs are not permitted

✓ Boarder income is not permitted ✓ Cash-on-hand is not permitted ✓ Employer funded 2nd lien allowance is not permitted

✓ Manual underwriting is not permitted ✓ Rental income for qualifying from any accessory unit or area not zoned as a legal rental is not

permitted

✓ HomeStyle Renovation loans are not permitted ✓ Non-Traditional credit is not permitted ✓ Community Land Trusts are not permitted

FAQs: https://www.fanniemae.com/content/faq/homeready-faqs.pdf

https://www.fanniemae.com/content/faq/homeready-faqs.pdf



Freddie Mac Home Possible Mortgages®

Summary Freddie Mac Home Possible® and Home Possible Advantage® mortgages

(collectively referred to as Home Possible mortgages) are a fixed rate, fully amortizing Purchase and Limited Cash Out Refinanced (LCOR) product for Primary

Residence only.

✓ Offered by Freddie Mac for low-to-moderate income Borrowers who need a

low-down payment and credit flexibility

✓ Loans must be in full compliance with Freddie Mac guidelines for Home Possible® mortgages (HP) loans and must meet FSM requirements unless

specifically addressed herein


Maximum

Loan Limits ✓ Standard conforming loan limits only

✓ High Balance loans are not allowed

Loan

Parameters Standard Home Possible

FRM 30 Year

✓ All loans are subject to MI approval; If MI approval cannot be obtained,

the loan is not eligible

✓ Purchase and LCOR transactions only

✓ CLTV up to 105% with Affordable Seconds

Home Possible/Home Possible Advantage Mortgages – Conforming Fixed (Rev 09/25/19)

Purpose # Units Min FICO

LPA Min Down Payment

% of Min DP Req.

from Borrower Personal Funds LTV CLTV

Primary Residence

Purchase &

LCOR

1 640 97 105 3% 0%

1 620 95 95 5% 0%

2 620 90 90 10% 3%

3-4 620 80 80 20% 3%




Freddie Mac Home Possible Mortgages®, Continued

Product Guidelines

The following matrix provides the Home Possible® Guidelines with FSM overlays.

All loans must meet the more restrictive of FSM or Freddie Mac Guidelines.

Topic Freddie Mac Home Possible® mortgages (HP) Requirements

Amortization 30-year terms only

Appraisal Appraisal subject to AUS and MI requirements

ARM Features ARMs available upon request; contact Pricing

Assets As required by LPA

Assumable No

ATR/QM All Home Possible mortgage loans must meet the ATR/QM guidelines

AUS LPA Accept/Eligible

Borrower Eligibility

✓ FSM eligible Borrowers ✓ Inter-Vivos Trust allowed

✓ Trailing Spouse income not permitted ✓ Borrower does not have to be first time homebuyer ✓ Occupying Borrower(s) may only own a total of two financed residential

properties, including the subject property, as of the Note Date.

Condos Eligible condos are allowed. See State Restrictions

Contributions Contributions by interested parties are permitted

LTV/TLTV >90% 3% of the lessor of the sales price or appraised

value ✓ Financing concessions may not exceed the

actual costs for Closing costs, Financing

costs and Prepaids/Escrows

LTV/TLTV>75% & <90% 6% of the lessor of sales price or appraised value

LTV/TLTV <75% 9% of the lessor of sales price or appraised value

Documentation Standard documentation. Adhere to AUS






DTI/Ratios Regardless of AUS Accept, Max 50%; subject to MI approval

Escrows Escrow accounts are required for all loans with LTV greater than 80%

✓ Properties located in the state of California may waive escrows up to but not greater than 89.99% LTV


FICO See Home Possible mortgages parameters table

Funds to Close Down Payment for Purchase Borrower Personal Funds and Other Borrower funds only

Closing Costs/Financing Costs/Prepaids/Escrows

Borrower Personal Funds and Other Borrower funds and Flexible Sources of Funds

Funds Defined Borrower Personal Funds – fully sourced and defined as: Funds on deposit in Borrower’s checking, savings, money market or

certificate of deposit account or other depository accounts

Proceeds of a loan fully secured by the Borrower’s own tangible assets Proceeds from the sale of a Borrower’s tangible assets

Other Borrower’s Funds – fully sourced and defined as: Gift from a related person per FSM guidelines

No Borrower minimum personal funds required on 1 unit (see

Home Possible Mortgages matrix)

If 2-4 unit, the Borrower must have 3% personal funds

Flexible Sources of Funds – fully sourced and defined as:

Seller concessions per Freddie guidelines Premium pricing per Freddie guidelines

Note: Flexible Sources of Funds may be used ONLY for Closing costs/Financing costs/Prepaids/Escrows






Homebuyer

Education

For purchase transactions secured by 1-4-unit primary residence, when all

Borrower(s) are First-Time Homebuyers, at least one occupying Borrower must participate in a homeownership education program before the Note date.

✓ The following Homeownership education programs are acceptable: Homeownership education programs offered by FSM’s currently

approved MI companies or provided by HUD-approved counseling agencies and Housing Finance Agencies Community Development Financial Institutions.

▪ A copy of the Homeowners Education Certificate must be included in the mortgage loan file submitted for underwriting

When the property is a 2-4-unit Primary Residence, Landlord Education is required.

✓ Purchase transactions: At least one qualifying Borrower must participate in a landlord education program before Note date (Note: If the Borrower

is a First Time Homebuyer, a First Time Homebuyer Education certificate is also required).

A copy of the successful Landlord Education Certification must be

included in the mortgage file at time of underwriting Landlord education must not be provided by an interested party to

the transaction, originating lender or the seller.

Note: ✓ Refinance Landlord Education is recommended for Borrowers who have

not previously attended a program ✓ Underwriting will not review loan files if the Homebuyer Education or the

Landlord Education (as applicable) Certificates are not included in the underwriting submission

✓ The seller must provide Post-Purchase and Early Delinquency Counseling

to the Borrower(s) at no cost to them.





Income and Census Tract

Eligibility

The Borrower must meet income limits. Loan Product Advisor will indicate income eligibility; Use of the Home Possible Income and Property Eligibility - Freddie Mac

is available on Freddiemac.com The Borrowers qualifying income, converted to an annual basis, must not exceed

80% of the area median income (AMI) for the location of the Mortgaged Premises; applies to all Home Possible Mortgages, including those secured by properties in low-income census tracts. To determine whether the Borrower’s income exceeds the income limits, the Seller must rely on the income used to qualify the Borrower

and submitted to Loan Product Advisor for the Loan Product Advisor Mortgages. See Guide Section 4501.7.

Note: Underwriters must validate the income; print the validation page and retain it in the credit file.

Rental income from a 1-unit primary residence can only account for 30% of qualifying income. Any portion of the Borrower’s rental income from their 1-unit primary residence which exceeds 30% of the total income can’t be used to qualify the Borrower. For rental income requirements, see Guide Section 4501.9:

Borrower income and qualifying ratios for Home Possible Mortgages.


http://www.freddiemac.com/homepossible/eligibility.html





Mortgage Insurance – Fixed Rate Term

> 21 years

LTV Coverage

Req.

Note: Standard MI Required ✓ Borrower Paid Monthly permitted ✓ LPMI options available

✓ Custom, Reduced, Split Premium or Financed MI not permitted

90.01-97.00% 25%

85.01-90.00% 25%

80.01-85.00% 12%

Mortgage Insurance – Fixed Rate Term <20 years

LTV Coverage

Req.

90.01-97.00% 25%

85.01-90.00% 12%

80.01-85.00% 6%

Non-Occupant

Borrowers

Permitted on 1-unit Primary Residence when the LTV/TLTV/HTLTV ratio is less

than or equal to 95% (TLTV 105% with Affordable Second)

Occupancy Primary Residence

Property Eligibility

1-4 Unit Primary Residence ✓ Condos are permitted

✓ PUDs are permitted ✓ No cooperatives ✓ No Manufactured Housing

Rental Income Rental income from a 1-unit primary residence that meets in requirements in Guide Section 4501.9(a) may be considered as stable income; Rental income from a 2- to 4-unit primary residence that meets Guide Chapter

5306 may be used as qualifying income

Reserves As determined by AUS


New and existing subordinate financing must be an Affordable Second. An Affordable Second that does not require a payment before the due

date of the 61st payment may be entered in Loan Product Advisor in the “Total Gift Fund” field. In all other respects, the Affordable Second must be considered as secondary financing.

HELOCS are not permitted.

Transaction Type Purchase and LCOR





If a particular census tract would be eligible under two separate sets of guidelines, the eligibility that is most favorable to the Borrower would be used. For example, if the property is located in both a high-minority census tract and a low-income census tract, we would apply the low-income census tract

criteria and there would be no income limit requirement (instead of the high-minority census tract income limit of 100% of the AMI).

FSM also has the following product overlays/exclusions: ✓ Buy-downs are not permitted ✓ Boarder income is not permitted ✓ Cash-on-hand is not permitted

✓ Employer funded 2nd lien allowance is not permitted ✓ Manual underwriting is not permitted ✓ Non-Traditional credit is not permitted

✓ Community Land Trusts are not permitted

FAQs: Frequently Asked Questions Home Possible Mortgages - Freddie Mac

http://www.freddiemac.com/homepossible/home_possible_faq.html



FSM Fannie Mae High Balance/Freddie Mac Super

Conforming Mortgages

Summary The High Balance/Super Conforming loan requirements are mortgages originated

using higher maximum loan limits. These loan limits are permitted in designated

high-cost areas as established by Federal Housing Financing Agency (FHFA).

✓ Product Codes: 300017,150017

Conforming Fixed High Balance (Rev 09/25/19)


LTV CLTV LTV CLTV

Primary Residence


1 620 95 95 90 90

2 620 85 85 75 75

3-4 620 75 75 75 75

Cash Out Refi 1 640 80 80 75 75

2-4 640 75 75 65 65

Second Home


1 640 90 90 80 80

Cash Out Refi 1 640 75 75 65 65

Investment Property

Purchase 1 700 85 85 80 80

2-4 700 75 75 70 70

Rate/Term Refi 1 700 75 75 75 75

2-4 700 75 75 70 70

Cash Out Refi 1 700 75 75 65 65

2-4 700 70 70 65 65




FSM Fannie Mae High Balance/Freddie Mac Super Conforming Mortgages, Continued

FSM Loan Limits

The original principal balance of each mortgage loan must not exceed the applicable maximum loan limit for the specific area. For specific loan limits as

released by FHFA, visit their conforming loan limits page FHFA Maximum

Conforming Loan Limits or Fannie Mae Loan Limit Geocoder: Home Page.

A copy of the screen print, validating the “high balance” loan must be included in

the credit section of the loan file.

Maximum Loan Amount for 2020

Units FSM Approved States

1 $510,400

2 $653,550

3 $789,950

4 $981,700

Maximum Loan Amount for High-Cost Areas for 2020

Units FSM Approved States

1 $765,600

2 $980,325

3 $1,184,925

4 $1,472,550


https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Maximum-Conforming-Loan-Limits-for-2018.aspx

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Maximum-Conforming-Loan-Limits-for-2018.aspx

https://onlinegeocoder.fanniemae.com/loanlimitgeocoder/pages/HomePage.aspx




High Balance and Super Conforming

Requirements

The following matrix outlines the requirements for Conventional High Balance

loans; all loans must meet the more restrictive of the applicable agency or FSM.

Important:

Any topic not addressed herein must follow the requirements outlined in the FSM

Seller Guide Conforming Product Suite or Underwriting Chapter.

✓ Topics not addressed in FSM Seller Guide revert to the applicable agency

AUS requirements

Topic High Balance/Super Conforming Requirements

Amortization 30-year and 15-year terms

Appraisal Standard appraisal requirements except “One-Unit Residential Appraisal Field

Review Report” (Form 2000) is also required if the property value is >$1 million and LTV/CLTV/HCLTV >75%. Use the lower of original appraised value, field review value or sales price (on purchase) to calculate LTV. Must be performed by

a Supervisory Appraiser.

ARM Features Not Applicable

Assets Adhere to AUS

ATR/QM All High Balance loans must meet the ATR/QM guidelines

AUS DU Approve/Eligible for Fannie Mae High Balance LPA Accept/Eligible for Freddie Mac Super Conforming

Contributions

LTV/TLTV Maximum IPS

>90% (maximum 95%) 3

75.01% - 90.00% 6

<=75% 9

Documentation Standard documentation

DTI/Ratios DU Approve/Eligible; Max 50% LPA Accept/Eligible; Max 50%

Escrows Escrow Accounts are required for all loans with LTV’s greater than 80% Properties located in the state of California may waive escrows up to but

not greater than 89.99% LTV






Topic High Balance/Super Conforming Requirements

FICO All Borrowers on the loan must have a credit score. See Conforming Fixed High

Balance Parameters table

Funds to Close Adhere to AUS

Geographic Restrictions

Property must be located in a designated High Balance Area

Income Eligibility Adhere to AUS

Ineligible Must meet requirements of Fannie Mae CPM or Limited Review

Mortgage Insurance

Standard MI required; Custom or Reduced MI is not permitted ✓ Borrower paid MI, Lender paid MI, monthly, single and split premium are

all permitted ✓ Financed MI is permitted, but LTV may not increase above the maximum

LTV that is otherwise permitted

Note: Annual or Monthly LPMI is not permitted

Non-Occupant

Borrowers

Allowed per DU AUS

Occupancy Primary Residence, Secondary Residences and Investment Properties

Property Type Single family, attached and detached

2-4 Units

PUD Condo *All properties to FSM Guidelines

Reserves Adhere to AUS

Subordinate

Financing

Permitted to Agency/FSM Guidelines

Seller Carry-Back Seconds are not permitted

Transaction Type Purchase, Rate/Term Refinance and Cash-Out Refinance to current FSM guidelines

FSM also has the following product overlays/exclusions:

✓ DU Refi Plus is not permitted ✓ Non-Traditional credit is not permitted ✓ Temporary Buy-Downs are not permitted

✓ Manual underwriting is not permitted ✓ LP Open Access is not permitted ✓ Seller owned modified mortgages not permitted



Multiple Financed Properties (5-10 Properties)

Product Codes ✓ Product Codes

• 300032,

• 150032

Primary Residence

FSM imposes no limit to the number of financed or unfinanced properties a Borrower may own. See the Underwriting Chapter for details on “Other Real

Estate Owned”.

Second Home and

Investment

✓ DU allows for the 5-10 financed property investment ownership with the reduced LTV and additional reserves required; DU Approve/Eligible

required;

✓ LPA allows for a maximum number of financed properties permitted to 10

provided that when the number of financed properties is greater than six:

The mortgage must be LPA Accept/Eligible

Have a minimum FICO score of 740

The Seller must verify reserves of 8 months of the monthly payment (as described in 5501.2(a)) on each additional second home and/or 1-to-4-unit investment property that is financed and

on which the Borrower is obligated.

▪ If the Borrower owns 1-6 financed properties including the

subject property and the Borrowers primary residence, 2 months of the monthly payment amount on each additional second home and/or 1-to 4-unit investment property that is financed and on which the Borrower is

obligated;

▪ If the Borrower owns 7 or more financed properties including

the subject property and the Borrower’s primary residence, 8 months of the monthly payment amount on each additional second home and/or 1-to 4-unit

investment property that is financed and on which the

Borrower is obligated.

✓ See the Underwriting Chapter/Borrowers/Multiple Mortgages to the Same Borrower for full details. See Pricing/Aggregate Loan limits for loan

amount limits;

✓ Additionally, follow the more restrictive of FSM or the applicable agency (DU or LPA) requirements for guidelines regarding the use of rental income to qualify (market rent for properties not reflected on tax returns,

conversion of current principal residence or newly acquired properties,

must have third party support for market rent data).

Note: Limits for multiple properties serviced by the same servicer. Each

servicer has specific limits to the number of properties it will service for one Borrower. Underwriting must take that into consideration at the time of

Underwriting; if the limit is reached, FSM cannot approve the loan.



Delayed Financing

Delayed Financing

Per Fannie Mae B2-1.2-03:

“Borrowers who purchased the subject property within the past six months (measured from the date on which the property was purchased to the

disbursement date of the new mortgage loan) are eligible for a cash-out refinance

if all of the following requirements are met:”

Requirements for Delayed Financing:

✓ The original purchase transaction was an arms-length transaction

✓ Borrower must meet Fannie Mae’s Borrower eligibility requirements B2-2-

01: General Borrower Eligibility Requirements (07/28/2015). The Borrower(s) may have originally purchased the subject property as one of

the following:

A natural person

An eligible Inter-Vivos revocable trust, when the Borrower is both the individual establishing the trust and the beneficiary of the

trust;

An eligible land trust when the Borrower is the beneficiary of the

land trust; or

An LLC or Partnership in which the Borrower(s) have an individual

or joint ownership of 100%

✓ The original purchase transaction is documented with a settlement statement that confirms no mortgage financing was used to obtain the

subject property (a recorded Trustees Deed (or similar alternative)

confirming the amount paid by the grantee to the trustee may be used in place of a settlement statement if a settlement statement was not provided to the purchaser at the time of the sale). The preliminary title

search or report must show there are no existing liens on the subject

property.

✓ The source of funds for the original purchase transaction must be

documented (such as bank statements, personal loan documents or a

HELOC on another property).

If the source of funds used to purchase the subject property was an unsecured loan or a loan secured by an additional asset other than the subject property (i.e. HELOC on another property), the

settlement statement for the refinance transaction must reflect that all cash-out proceeds be used to pay off or pay down (as applicable) the loan used to purchase the subject property. Any

payments on the remaining balance from the original loan must be included in the debt-to-income ratio calculation for the refinance transaction. Note: Funds received as a gift and used to purchase the subject property may not be reimbursed with proceeds of the

new mortgage loan.


https://www.fanniemae.com/content/guide/selling/b2/2/01.html

https://www.fanniemae.com/content/guide/selling/b2/2/01.html



Delayed Financing, Continued

Delayed Financing, continued

✓ The new loan amount can be no more than the actual documented amount of the Borrower’s initial investment in purchasing the property

plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV and HCLTV ratios for

the cash-out transaction based on the current appraised value).

✓ All other cash-out refinanced eligibility requirements must be met. Cash-

out pricing is applicable.



DU Loan Case Files: At least one Borrower has no

credit score and another Borrower has a credit score

1 FICO Score FSM will accept loans where at least one Borrower does not have a valid credit

score under the following guidelines. The loan must meet each of the following

applicable requirements:

✓ Applicable to all Fannie Mae conforming loan programs

✓ DU Approve/Eligible loans only

✓ Conforming loan amounts only (no high balance mortgages)

✓ Purchase or limited cash-out refinance

✓ One-unit, principal residence and all Borrowers must occupy

✓ At least one Borrower on the loan must have a valid credit score of 620 or

greater

✓ The Borrower with a valid credit score must contribute more than 50% of

the qualifying income

✓ Reserves will be determined by DU Approve/Eligible AUS

LO & Pricing Requirements

To utilize this feature, the following steps must be applied:

✓ Select the “FSM” program in Optimal Blue (OB)

✓ Email Pricing stating in the Subject line:

The Borrowers loan number and the statement “Borrower without

a valid credit score” loan feature

Pricing will code the loan to the appropriate investor as well as

identifying the loan feature in the “Notes” section of the General

Information screen in LOS.



Opportunity for Elderly Parent(s) and Disabled

Child

Opportunity for Elderly

Parent and Disabled Child

General Requirements:

✓ Purchase or Rate/Term refinancing

✓ Cash-Out refinance not permitted

✓ 1 unit

✓ DU required Approve/Eligible

✓ 95% LTV/CLTV

✓ Subordinate Financing is not permitted

✓ Family member Borrower is purchasing for does not have to be in title or

on the loan

Elderly Parent

requirements ✓ Must be able to document that the parents are unable to afford the

mortgage (i.e. provide parents tax return)

✓ Borrower must qualify for both their home and parents’ home

✓ Property must be occupied as the primary residence by the parents

✓ Property location does not need to be a certain distance away from

Borrower – it can be near Borrower

✓ Letter of Explanation detailing the parents’ financial inability and their

intent to occupy the home

Disabled Adult

Child requirements

✓ Must be able to document that child is disabled (unable to work) or

doesn’t have sufficient income

✓ All other requirements are the same as Elderly Parents



Retail Specific Programs

Freddie Mac Direct

Freddie Mac Direct (Rev 09/25/19)


LTV CLTV LTV CLTV

Primary Residence


1 620 N/A N/A 95 95

1 680 95 95 95 95

2 620 N/A N/A 85 85

2 680 85 85 85 85

3-4 620 N/A N/A 80 80

3-4 680 75 75 80 80

Cash Out Refi 1 640 N/A N/A 80 80

1 680 80 80 80 80

2-4 640 N/A N/A 75 75

2-4 680 75 75 75 75

Second Home

Purchase &

Rate/Term Refi

1 640 N/A N/A 90 90

1 680 90 90 90 90

Cash Out Refi 1 640 N/A N/A 75 75

1 680 75 75 75 75

Investment Property

Purchase 1 680 75 75 85 85

2-4 680 75 75 75 75

Rate/Term Refi 1 680 75 75 85 85

2-4 680 75 75 75 75

Cash Out Refi 1 680 75 75 75 75

2-4 680 70 70 70 70

Product Codes: 300010, 200010, 150010 Investment Property: Max LTV of 80% on Condos

DU on-exception basis with 680 FICO DU Appraisal Waiver is not permitted DU Leasehold properties are not permitted



FSB Servicing Retained

Summary FSM offers for the Retail Channel a FSB Servicing Retained program where the

loan will be sold to Freddie Mac, but the servicing will be retained by our parent

company, First State Bank.

Loan Parameters

The programs available for retained servicing are:

✓ Conventional fixed rate only (30,20 & 15-year terms)

✓ LTVs 80% and below

✓ All IL counties (except Cook)

✓ FICOs of 680 and above

✓ Use of LPA preferred, although DU is available

✓ Aggressive pricing on lower loan amounts

(<=$85,000; <=$110,000; <=$150,000)

✓ Product codes: 300059, 200059, 150059

Freddie Mac – FSB Servicing Retained (Rev 09/25/19)


LTV CLTV LTV CLTV

Primary Residence


1 680 80 80 80 80

2-4 680 75 75 80 80

Cash Out Refi 1 680 80 80 80 80

2-4 680 75 75 75 75

Second Home

Purchase & Rate/Term

1 680 80 80 80 80

Cash Out Refi 1 680 75 75 75 75

Investment Property


1 680 75 75 80 80

2-4 680 75 75 75 75

Cash Out Refi 1 680 75 75 75 75

2-4 680 70 70 70 70

✓ Leasehold properties not allowed when using DU



Piggyback Buster Program

Loan Parameters

✓ LPMI is Investor paid

✓ Notice Concerning Private Mortgage Insurance Disclosure is required


Topic Piggyback Buster Program Requirements

Amortization 30-year fixed rate with level payments for life of loan

Appraisal Fully completed URAR is required

Assumable Not assumable

ATR/QM All Piggyback Buster loans must meet the ATR/QM guidelines

AUS LPA Accept/Eligible and DU Approve/Eligible

Borrower Eligibility

✓ All Borrowers must have a valid Social Security number ✓ Must be a US Citizen or Permanent Resident Alien or Non-Permanent

Resident Alien

✓ Ineligible Title/Ownership: Land Trusts, Inter-Vivos Trust, Life Estates, Non-Revocable Trusts, Guardianships, Conservatorships, LLCs, Corporations and Partnerships

✓ Investment Properties in the name of LLC is ineligible Note: Employment Authorization Document (EAD Card) will be required if the Visa is expiring within 12 months or is expired.

Condos Eligible Condos are allowed. See State Restrictions. Note: Non-Warrantable Condos are not allowed.

Contributions Primary Residences: 3% of the lessor of the sales price or appraised value

Documentation Underwritten to Freddie Mac Guidelines

DTI/Ratios Regardless of AUS Approve/Accept, Max 50%

Note: Attached properties in Florida and Nevada are restricted to a max DTI <=41%

Escrows Required; Waivers are not permitted


FICO Minimum 680 FICO is required

Funds to Close Standard Freddie Mac requirements

HPML FSM will not purchase any loan defined as “high cost” under any federal or state law/regulation or local ordinances and any subsequent amendments thereto

Income Eligibility Adhere to Freddie Mac Guidelines

Mortgage Insurance

Investor paid Mortgage Insurance

Non-Occupant Borrowers

Not permitted

Property Type 1 unit detached or attached

Reserves Standard Freddie Mac required reserves




Piggyback Buster Program, Continued

Topic Piggyback Buster Program Requirements


Not permitted

Transaction Type ✓ Purchase ✓ Rate/Term refinance limited to the following:

The payoff of the outstanding principal balance of an existing first mortgage

The payoff of the outstanding principal balance of any existing

subordinate mortgage that was used in whole to acquire the subject property

The financing of closing costs (including prepaid expenses), and Cash back to the Borrower in the amount no more than the lesser

of 2% of the balance of the new refinance mortgage or $2,000 ✓ Streamline refinances are not permitted ✓ Cash out refinances are not permitted

FSM also has the following product overlays/exclusions: ✓ Temporary Buy-downs are not permitted

✓ Multi-unit properties are not permitted ✓ Manufactured homes, Second Homes and Investment property are not permitted ✓ Trailing Co-Borrower not permitted



Down Payment Assistance Programs

IHDA https://www.ihda.org/lenders-realtors/common-forms/

Assist https://www.ehousingplus.com/available-

programs/illinois/illinois-assist/

FHLB https://www.fhlbc.com/community-investment/downpayment-plus-

programs

Note: Please contact SVP of Sales for Stand Alone MCC documents

https://www.ihda.org/lenders-realtors/common-forms/

https://www.ehousingplus.com/available-programs/illinois/illinois-assist/

https://www.ehousingplus.com/available-programs/illinois/illinois-assist/

https://www.fhlbc.com/community-investment/downpayment-plus-programs

https://www.fhlbc.com/community-investment/downpayment-plus-programs

conforming product suite guide/conforming product suite.pdf · 2020-06-25 · conforming product...

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