Significant Derogatory Credit Event Updates and Retirement of Certain Special Feature Codes (SFCs) Topic Bankruptcies Impacted Document Correspondent Section 2.01 Agency Loan Programs‐Guideline Impacted Products •
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Last Revision Date: 9/19/14 (Correspondent) Standard Agency (non‐AUS & DU) Agency Plus (DU) Texas Cash‐Out Refinance (DU) Current Guidelines Effective for Loan Applications PRIOR TO September 22, 2014 Revised Guidelines Effective for NEW Loan Applications ON OR AFTER September 22, 2014 Non‐AUS
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If a public record does not indicate a bankruptcy, but an individual tradeline does, the borrower must meet these bankruptcy guidelines. •
Generally, bankruptcies (except Chapter 13) must be discharged or dismissed at least four (4) years before the disbursement date of the new loan. •
Chapter 13 bankruptcies must be: •
discharged at least two (2) years before the disbursement date of the new loan, or •
dismissed at least four (4) years before the disbursement date of the new loan. •
A shorter time of two (2) years from the bankruptcy discharge or dismissal date may be considered if extenuating circumstances existed, as defined below: •
extenuating circumstances are created by non‐recurring events out of the borrower’s control that cause a reduction in income or increase in liabilities and are not defined solely by an event (i.e., a job layoff or divorce is not acceptable by itself without an explanation and documentation of the lack of reasonable options), and •
there must be an interrelationship between the event, the severity of the hardship and the borrower’s efforts to resolve the situation. Note: No exceptions are permitted to the two (2) year time period after a Chapter 13 discharge. •
For borrowers with multiple bankruptcy filings, the following applies: •
A five (5) year time period from the most recent dismissal or discharge date is required for borrowers with more than one (1) bankruptcy filing within the past seven (7) years. •
A shorter time period of three (3) years from the most recent discharge or dismissal date may be considered if extenuating circumstances existed. The most recent bankruptcy filing must have been the result of extenuating circumstances. •
Borrowers with a bankruptcy that has been discharged or dismissed for four (4) years or more, as evidenced by the credit report, are NOT required to provide a complete copy of the bankruptcy documents. If the discharge or dismissal is less than four (4) years (i.e., in the case of a Chapter 13 bankruptcy or when extenuating circumstances existed), the borrower must provide a copy of the bankruptcy documents or a complete copy of documentation to establish the date of the bankruptcy, written explanation, and documentation to support claim of any extenuating circumstances. •
The borrower must show a re‐established satisfactory credit history. The borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period requirements are met. •
The borrower meets all other credit requirements outlined in the product guidelines. •
The borrower has traditional credit. Non‐traditional credit or “thin files” are not acceptable. Fannie Mae DU •
Non‐AUS guidelines apply with the following exceptions: •
The waiting period begins on the dismissal/discharge date and ends on the credit report date. •
If “Approve/Eligible” the following applies: •
The borrower’s credit will be considered re‐established if all of the following are met: •
The waiting period requirements are met. •
The borrower meets all other credit requirements outlined in the product guidelines. Note: All bankruptcies must be satisfied prior to the credit report date in order for the mortgage to be eligible. Non‐AUS
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If a public record does not indicate a bankruptcy, but an individual tradeline does, the borrower must meet these bankruptcy guidelines. •
If a mortgage debt has been discharged through a bankruptcy, even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt, bankruptcy waiting periods may be applied if the appropriate documentation is obtained to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied. •
Generally, bankruptcies (except Chapter 13) must be discharged or dismissed at least four (4) years before the disbursement date of the new loan. •
Chapter 13 bankruptcies must be: •
discharged at least two (2) years before the disbursement date of the new loan, or •
dismissed at least four (4) years before the disbursement date of the new loan. •
A shorter time of two (2) years from the bankruptcy discharge or dismissal date may be considered if extenuating circumstances existed, as defined below: •
extenuating circumstances are created by non‐recurring events out of the borrower’s control that cause a reduction in income or increase in liabilities and are not defined solely by an event (i.e., a job layoff or divorce is not acceptable by itself without an explanation and documentation of the lack of reasonable options), and •
there must be an interrelationship between the event, the severity of the hardship and the borrower’s efforts to resolve the situation. Note: No exceptions are permitted to the two (2) year time period after a Chapter 13 discharge. •
For borrowers with multiple bankruptcy filings, the following applies: •
A five (5) year time period from the most recent dismissal or discharge date is required for borrowers with more than one (1) bankruptcy filing within the past seven (7) years. •
A shorter time period of three (3) years from the most recent discharge or dismissal date may be considered if extenuating circumstances existed. The most recent bankruptcy filing must have been the result of extenuating circumstances. •
Borrowers with a bankruptcy that has been discharged or dismissed for four (4) years or more, as evidenced by the credit report, are NOT required to provide a complete copy of the bankruptcy documents. If the discharge or dismissal is less than four (4) years (i.e., in the case of a Chapter 13 bankruptcy or when extenuating circumstances existed), the borrower must provide a copy of the bankruptcy documents or a complete copy of documentation to establish the date of the bankruptcy, written explanation, and documentation to support claim of any extenuating circumstances. •
The borrower must show a re‐established satisfactory credit history. The borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period requirements are met. •
The borrower meets all other credit requirements outlined in the product guidelines. •
The borrower has traditional credit. Non‐traditional credit or “thin files” are not acceptable. Fannie Mae DU •
Non‐AUS guidelines apply with the following exceptions: •
The waiting period begins on the dismissal/discharge date and ends on the credit report date. •
If “Approve/Eligible” the following applies: •
The borrower’s credit will be considered re‐established if all of the following are met: •
The waiting period requirements are met. •
The borrower meets all other credit requirements outlined in the product Page 1 of 8 Significant Derogatory Credit Event Updates and Retirement of Certain Special Feature Codes (SFCs) Topic Impacted Document Impacted Products •
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Current Guidelines Effective for Loan Applications PRIOR TO September 22, 2014 Extenuating circumstances for bankruptcy actions are not eligible for DU processed loans. If a trade line is reported in bankruptcy status (payment code of “7”), a bankruptcy is reported in the public records, and the DU Findings Report reflects the bankruptcy, no additional underwriting is required. If the DU Findings Report does not address a bankruptcy that does not meet minimum waiting period requirements, the loan must be traditionally underwritten to non‐AUS guidelines. Freddie Mac LP •
For “Accept/Eligible” mortgages, the significance of the bankruptcy information has already been considered by Loan Prospector and the borrower's credit reputation has been deemed acceptable. No further evaluation of the bankruptcy is required. . Deed‐In‐Lieu of Foreclosure Correspondent Section 2.01 Agency Loan Programs‐Guideline •
Last Revision Date: 9/19/14 (Correspondent) Standard Agency (non‐AUS) Non‐AUS
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Indicators that may be disclosed on the borrower’s credit report that would identify a deed‐in‐lieu of foreclosure include, but are not limited to, one of the following remarks codes associated with the credit report tradeline: •
E0085, •
T0060, •
T0061, or •
T0213. •
The waiting period for a borrower to be eligible for a mortgage loan after a deed‐in‐lieu of foreclosure is outlined in the table below. Note: The waiting period begins on the completion date (date deed‐in‐lieu is executed), ends on the disbursement date of the new loan and will vary based on the maximum allowable LTV/TLTV/HTLTV. Waiting Period Max LTV/TLTV/HTLTV
2 years but less than 4 years
80% LTV/TLTV/HTLTV
4 years but less than 7 years
90% LTV/TLTV/HTLTV
Note: If the LTV > 80%, then MI guidelines apply. 7 years
Max LTV/TLTV/HTLTV per product guidelines applies. Note: If the LTV > 80%, then MI guidelines apply. Note: The maximum LTV/TLTV/HTLTV ratio is limited to the lesser of the LTV/TLTV/HTLTV as outlined in the table above or the maximum LTV/TLTV/HTLTV for the specific product based on the transaction type. Page 2 of 8 Revised Guidelines Effective for NEW Loan Applications ON OR AFTER September 22, 2014 guidelines. •
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Note: All bankruptcies must be satisfied prior to the credit report date in order for the mortgage to be eligible. Extenuating circumstances for bankruptcy actions are not eligible for DU processed loans. If a trade line is reported in bankruptcy status (payment code of “7”), a bankruptcy is reported in the public records, and the DU Findings Report reflects the bankruptcy, no additional underwriting is required. If the DU Findings Report does not address a bankruptcy that does not meet minimum waiting period requirements, the loan must be traditionally underwritten to non‐AUS guidelines. If the loan casefile receives a “Refer with Caution” recommendation due to a foreclosure identified by DU as taking place in the last seven years, the account was one discharged through a bankruptcy, and the bankruptcy waiting period requirements have been met, the underwriter may instruct DU to disregard the foreclosure information. Click here for DU instructions and documentation requirements. Freddie Mac LP •
For “Accept/Eligible” mortgages, the significance of the bankruptcy information has already been considered by Loan Prospector and the borrower's credit reputation has been deemed acceptable. No further evaluation of the bankruptcy is required. . Non‐AUS
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Indicators that may be disclosed on the borrower’s credit report that would identify a deed‐in‐lieu of foreclosure include, but are not limited to, one of the following remarks codes associated with the credit report tradeline: •
E0085, •
T0060, •
T0061, or •
T0213. •
The waiting period begins on the completion date (date deed‐in‐lieu is executed) and ends on the disbursement date of the new loan. •
Deed‐in‐lieu of foreclosures must be completed four or more years from the disbursement date of the new loan, or two or more years from the disbursement date of the new loan when documentation is obtained that the borrower had an extenuating circumstance and all other Deed‐
in‐Lieu of Foreclosure guidelines are met. •
The waiting period for a borrower to be eligible for a mortgage loan after a deed‐in‐lieu of foreclosure is outlined in the table below. Note: The waiting period begins on the completion date (date deed‐in‐lieu is executed), ends on the disbursement date of the new loan and will vary based on the maximum allowable LTV/TLTV/HTLTV. Waiting Period
Max LTV/TLTV/HTLTV 2 years but less than 4 years
80% LTV/TLTV/HTLTV 4 years but less than 7 years
90% LTV/TLTV/HTLTV Note: If the LTV > 80%, then MI guidelines apply. Significant Derogatory Credit Event Updates and Retirement of Certain Special Feature Codes (SFCs) Topic Impacted Document Current Guidelines Effective for Loan Applications PRIOR TO September 22, 2014 Impacted Products •
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Extenuating circumstances are created by non‐recurring events out of the borrower’s control that cause a reduction in income or increase in liabilities and are not defined solely by an event (i.e., a job layoff or divorce is not acceptable by itself without an explanation and documentation of the lack of reasonable options). There must be an interrelationship between the event, the severity of the hardship and the borrower’s efforts to resolve the situation. If extenuating circumstances contributed to the borrower’s financial hardship causing one of the above events to occur, the following guidelines apply: Waiting Period Max LTV/TLTV/HTLTV
2 years 90% LTV/TLTV/HTLTV
Note: If the LTV > 80%, then MI guidelines apply. Note: The maximum LTV/TLTV/HTLTV ratio is limited to the lesser of the LTV/TLTV/HTLTV as outlined in the table above or the maximum LTV/TLTV/HTLTV for the specific product based on the transaction type. •
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The borrower must show a re‐established satisfactory credit history. The borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period and the related LTV requirements are met. •
The borrower meets all other credit requirements outlined in the product guidelines. •
The borrower has traditional credit. Non‐traditional credit or “thin files” are not acceptable. Fannie Mae DU •
Non‐AUS guidelines apply with the following exceptions: •
The waiting period begins on the completion date (date deed‐in‐lieu is executed) and ends on the disbursement date of the new loan. •
Standard DU LTV/TLTV/HTLTV guidelines apply. •
Deed‐in‐lieu of foreclosures must be completed four or more years from the disbursement date of the new loan, or two or more years from the disbursement date of the new loan when documentation is obtained that the borrower had an extenuating circumstance and all other deed‐in‐lieu of foreclosure guidelines are met. •
The borrower’s credit will be considered re‐established if all of the following are met: •
The waiting period requirements are met. •
The loan receives an “Approve/Eligible” recommendation from DU. •
The borrower meets all other credit requirements outlined in the product guidelines. •
When there is conflicting or inaccurate foreclosure information provided on a deed‐in‐lieu of foreclosure credit report tradeline, the underwriter may instruct DU to disregard the conflicting or inaccurate information. Click here for DU instructions and documentation requirements. Freddie Mac LP •
Non‐AUS guidelines apply regarding the indicators that may be disclosed on the borrower’s credit report that would identify a deed‐in‐lieu of foreclosure. •
For “Accept/Eligible” mortgages, the significance of the deed‐in‐lieu of foreclosure information has already been considered by Loan Prospector and the borrower's credit reputation has been deemed acceptable. No further evaluation of the deed‐in‐lieu of foreclosure is required. Last Revision Date: 9/19/14 (Correspondent) Revised Guidelines Effective for NEW Loan Applications ON OR AFTER September 22, 2014 Max LTV/TLTV/HTLTV per product guidelines 7 years
applies. Note: If the LTV > 80%, then MI guidelines apply. Note: The maximum LTV/TLTV/HTLTV ratio is limited to the lesser of the LTV/TLTV/HTLTV as outlined in the table above or the maximum LTV/TLTV/HTLTV for the specific product based on the transaction type. Page 3 of 8 •
Extenuating circumstances are created by non‐recurring events out of the borrower’s control that cause a reduction in income or increase in liabilities and are not defined solely by an event (i.e., a job layoff or divorce is not acceptable by itself without an explanation and documentation of the lack of reasonable options). There must be an interrelationship between the event, the severity of the hardship and the borrower’s efforts to resolve the situation. If extenuating circumstances contributed to the borrower’s financial hardship causing one of the above events to occur, the following guidelines apply: Waiting Period
Max LTV/TLTV/HTLTV 2 years 90% LTV/TLTV/HTLTV Note: If the LTV > 80%, then MI guidelines apply. Note: The maximum LTV/TLTV/HTLTV ratio is limited to the lesser of the LTV/TLTV/HTLTV as outlined in the table above or the maximum LTV/TLTV/HTLTV for the specific product based on the transaction type. The borrower must show a re‐established satisfactory credit history. The borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period and the related LTV requirements are met. •
The borrower meets all other credit requirements outlined in the product guidelines. •
The borrower has traditional credit. Non‐traditional credit or “thin files” are not acceptable. Fannie Mae DU •
Non‐AUS guidelines apply with the following exceptions: The waiting period begins on the completion date (date deed‐in‐lieu is executed) and ends on •
the disbursement date of the new loan. •
Standard DU LTV/TLTV/HTLTV guidelines apply. •
Deed‐in‐lieu of foreclosures must be completed four or more years from the disbursement date of the new loan, or two or more years from the disbursement date of the new loan when documentation is obtained that the borrower had an extenuating circumstance and all other deed‐in‐lieu of foreclosure guidelines are met. •
The borrower’s credit will be considered re‐established if all of the following are met: •
The waiting period requirements are met. •
The loan receives an “Approve/Eligible” recommendation from DU. •
The borrower meets all other credit requirements outlined in the product guidelines. •
When there is conflicting or inaccurate foreclosure information provided on a deed‐in‐lieu of foreclosure credit report tradeline, the underwriter may instruct DU to disregard the conflicting or inaccurate information. Click here for DU instructions and documentation requirements. Significant Derogatory Credit Event Updates and Retirement of Certain Special Feature Codes (SFCs) Topic Foreclosure Impacted Document Correspondent Section 2.01 Agency Loan Programs‐Guideline Impacted Products •
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Last Revision Date: 9/19/14 (Correspondent) Standard Agency (non‐AUS & DU) Agency Plus (DU) Texas Cash‐Out Refinance (DU) Current Guidelines Effective for Loan Applications PRIOR TO September 22, 2014 Non‐AUS
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Indicators that may be disclosed on the borrower’s credit report that would identify a foreclosure include, but are not limited to: •
a current manner of payment (MOP) of “8,” •
a maximum delinquency MOP of “8,” •
a MOP in the MOP history grid of “8,” or •
a Remarks Code that indicates a foreclosure. •
Generally, a seven (7) year waiting period is required for a borrower to be eligible for a mortgage loan after a foreclosure. Note: The waiting period begins on the completion date of the foreclosure and ends on the disbursement date of the new loan. •
A shorter time of three (3) years from the foreclosure completion date may be considered if extenuating circumstances existed, as defined below: •
extenuating circumstances are created by non‐recurring events out of the borrower’s control that cause a reduction in income or increase in liabilities and are not defined solely by an event (i.e., a job layoff or divorce is not acceptable by itself without an explanation and documentation of the lack of reasonable options), and •
there must be an interrelationship between the event, the severity of the hardship and the borrower’s efforts to resolve the situation. Note: Extenuating circumstances must be thoroughly documented in the loan file. •
If the foreclosure was the result of documented extenuating circumstances, the following additional requirements apply after three (3) years up to seven (7) years following the foreclosure completion date: •
For all eligible transactions, the maximum LTV/TLTV/HTLTV is the lesser of 90% or the maximum LTV/TLTV/HTLTV per the transaction type. •
The purchase of a primary residence is permitted. •
Limited cash‐out refinance transactions are permitted for all occupancy types. •
The purchase of a second home or investment property is not permitted. •
Cash‐out refinance transactions (all occupancy types) are not permitted. •
If not clearly identified on the credit report, the borrower must provide a complete copy of the foreclosure documents to establish the completion date of the foreclosure. •
The borrower must show a re‐established satisfactory credit history. The borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period and the related LTV and occupancy requirements are met. •
The borrower meets all other credit requirements outlined in the product guidelines. •
The borrower has traditional credit. Non‐traditional credit or “thin files” are not acceptable. Fannie Mae DU •
Non‐AUS guidelines apply with the following exceptions: Page 4 of 8 Revised Guidelines Effective for NEW Loan Applications ON OR AFTER September 22, 2014 Freddie Mac LP
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Non‐AUS guidelines apply regarding the indicators that may be disclosed on the borrower’s credit report that would identify a deed‐in‐lieu of foreclosure. •
For “Accept/Eligible” mortgages, the significance of the deed‐in‐lieu of foreclosure information has already been considered by Loan Prospector and the borrower's credit reputation has been deemed acceptable. No further evaluation of the deed‐in‐lieu of foreclosure is required. Non‐AUS
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Indicators that may be disclosed on the borrower’s credit report that would identify a foreclosure include, but are not limited to: •
a current manner of payment (MOP) of “8,” •
a maximum delinquency MOP of “8,” •
a MOP in the MOP history grid of “8,” or •
a Remarks Code that indicates a foreclosure. •
If a mortgage debt has been discharged through a bankruptcy, even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt, bankruptcy waiting periods may be applied if the appropriate documentation is obtained to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied. •
Generally, a seven (7) year waiting period is required for a borrower to be eligible for a mortgage loan after a foreclosure. Note: The waiting period begins on the completion date of the foreclosure and ends on the disbursement date of the new loan. •
A shorter time of three (3) years from the foreclosure completion date may be considered if extenuating circumstances existed, as defined below: •
extenuating circumstances are created by non‐recurring events out of the borrower’s control that cause a reduction in income or increase in liabilities and are not defined solely by an event (i.e., a job layoff or divorce is not acceptable by itself without an explanation and documentation of the lack of reasonable options), and •
there must be an interrelationship between the event, the severity of the hardship and the borrower’s efforts to resolve the situation. Note: Extenuating circumstances must be thoroughly documented in the loan file. •
If the foreclosure was the result of documented extenuating circumstances, the following additional requirements apply after three (3) years up to seven (7) years following the foreclosure completion date: •
For all eligible transactions, the maximum LTV/TLTV/HTLTV is the lesser of 90% or the maximum LTV/TLTV/HTLTV per the transaction type. •
The purchase of a primary residence is permitted. •
Limited cash‐out refinance transactions are permitted for all occupancy types. •
The purchase of a second home or investment property is not permitted. •
Cash‐out refinance transactions (all occupancy types) are not permitted. •
If not clearly identified on the credit report, the borrower must provide a complete copy of the foreclosure documents to establish the completion date of the foreclosure. •
The borrower must show a re‐established satisfactory credit history. The borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period and the related LTV and occupancy requirements are met. •
The borrower meets all other credit requirements outlined in the product guidelines. Significant Derogatory Credit Event Updates and Retirement of Certain Special Feature Codes (SFCs) Topic Impacted Document Impacted Products •
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Current Guidelines Effective for Loan Applications PRIOR TO September 22, 2014 The waiting period begins on the completion date of the foreclosure and ends on the credit report date. The borrower’s credit will be considered re‐established if all of the following are met: •
The waiting period and the related LTV and occupancy requirements are met. •
The loan receives an “Approve/Eligible” recommendation from DU. •
The borrower meets all other credit requirements outlined in the product guidelines. When there is conflicting or inaccurate foreclosure information provided on a foreclosure, deed‐in‐lieu of foreclosure, or short sale credit report tradeline, the underwriter may instruct DU to disregard the conflicting or inaccurate information. Click here for DU instructions and documentation requirements. When DU identifies a foreclosure on a credit report tradeline and the foreclosure was due to extenuating circumstances, the underwriter may instruct DU to disregard the foreclosure information on the credit report. Click here for DU instructions and documentation requirements. Freddie Mac LP •
Non‐AUS guidelines apply regarding the indicators that may be disclosed on the borrower’s credit report that would identify a foreclosure. •
For “Accept/Eligible” mortgages, the significance of the foreclosure information has already been considered by Loan Prospector and the borrower's credit reputation has been deemed acceptable. No further evaluation of the foreclosure is required. Short Sales Correspondent Section 1.28 Short Sales and Restructured Mortgage Loans‐
Guideline •
Last Revision Date: 9/19/14 (Correspondent) Standard Agency (non‐AUS) Non‐AUS
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A short sale, sometimes referred to as a short payoff or a preforeclosure sale, is defined as a transaction wherein a mortgage lender agrees to accept a lesser amount than is currently owed to satisfy the existing mortgage. •
Indicators that may be disclosed that would identify a short sale include, but are not limited to: •
a 1099C from the mortgage lender, MI company or third party investor, •
the borrower’s credit report indicates wording such as, “Settled for less than amount owed,” or “PIF” (Paid In Full) ‐ not as agreed, or •
the borrower’s credit report indicates Remarks Codes associated with the credit report tradeline of E0047, R0107, or T0140. •
Once a short sale is completed, the loan balance is charged off. •
Depending on state law or the mortgage legal documents, the lender or the investor may have a right to file a deficiency judgment after the completion of the short sale, to collect the losses incurred. •
Borrowers with a Short Sale in Credit History •
The following combined time elapse since a short sale and LTV/TLTV/HTLTV guidelines apply. •
Two (2) years but less than four (4) years, the maximum LTV/TLTV/HTLTV is 80%. •
Four (4) years but less than seven (7) years, the maximum LTV/TLTV/HTLTV is 90%. Page 5 of 8 Revised Guidelines Effective for NEW Loan Applications ON OR AFTER September 22, 2014 The borrower has traditional credit. Non‐traditional credit or “thin files” are not acceptable. •
Fannie Mae DU •
Non‐AUS guidelines apply with the following exceptions: •
The waiting period begins on the completion date of the foreclosure and ends on the credit report date. •
The borrower’s credit will be considered re‐established if all of the following are met: •
The waiting period and the related LTV and occupancy requirements are met. •
The loan receives an “Approve/Eligible” recommendation from DU. •
The borrower meets all other credit requirements outlined in the product guidelines. •
When there is conflicting or inaccurate foreclosure information provided on a foreclosure, deed‐in‐lieu of foreclosure, or short sale credit report tradeline, the underwriter may instruct DU to disregard the conflicting or inaccurate information. Click here for DU instructions and documentation requirements. •
When DU identifies a foreclosure on a credit report tradeline and the foreclosure was due to extenuating circumstances, the underwriter may instruct DU to disregard the foreclosure information on the credit report. Click here for DU instructions and documentation requirements. •
If the loan casefile receives a “Refer with Caution” recommendation due to a foreclosure identified by DU as taking place in the last seven years, the account was one discharged through a bankruptcy, and the bankruptcy waiting period requirements have been met, the underwriter may instruct DU to disregard the foreclosure information. Click here for DU instructions and documentation requirements. Freddie Mac LP •
Non‐AUS guidelines apply regarding the indicators that may be disclosed on the borrower’s credit report that would identify a foreclosure. •
For “Accept/Eligible” mortgages, the significance of the foreclosure information has already been considered by Loan Prospector and the borrower's credit reputation has been deemed acceptable. No further evaluation of the foreclosure is required. Non‐AUS
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A short sale, sometimes referred to as a short payoff or a preforeclosure sale, is defined as a transaction wherein a mortgage lender agrees to accept a lesser amount than is currently owed to satisfy the existing mortgage. •
Indicators that may be disclosed that would identify a short sale include, but are not limited to: •
a 1099C from the mortgage lender, MI company or third party investor, •
the borrower’s credit report indicates wording such as, “Settled for less than amount owed,” or “PIF” (Paid In Full) ‐ not as agreed, or •
the borrower’s credit report indicates Remarks Codes associated with the credit report tradeline of E0047, R0107, or T0140. •
Once a short sale is completed, the loan balance is charged off. •
Depending on state law or the mortgage legal documents, the lender or the investor may have a right to file a deficiency judgment after the completion of the short sale, to collect the losses incurred. •
Borrowers with a Short Sale in Credit History •
The waiting period begins on the completion date (date short sale is executed) and ends on the disbursement date of the new loan. •
Short sales must be completed four or more years from the disbursement date of the new loan, or two or more years from the disbursement date of the new loan when documentation Significant Derogatory Credit Event Updates and Retirement of Certain Special Feature Codes (SFCs) Topic Impacted Document Impacted Products •
Current Guidelines Effective for Loan Applications PRIOR TO September 22, 2014 Seven (7) years or greater, then the maximum LTV/TLTV/HTLTV is per product guidelines. Notes: •
The waiting period begins on the completion date (date short sale is executed), ends on the disbursement date of the new loan and will vary based on the maximum allowable LTV/TLTV/HTLTV. •
If the LTV is greater than 80%, MI guidelines apply. •
The maximum LTV/TLTV/HTLTV is limited to the lesser of the LTV/TLTV/HTLTV as outlined above or the maximum LTV/TLTV/HTLTV for the specific product based on the transaction type. •
Notes: •
The waiting period begins on the completion date (date short sale is executed), ends on the disbursement date of the new loan and will vary based on the maximum allowable LTV/TLTV/HTLTV. •
If the LTV is greater than 80%, MI guidelines apply. •
The maximum LTV/TLTV/HTLTV is limited to the lesser of the LTV/TLTV/HTLTV as outlined above or the maximum LTV/TLTV/HTLTV for the specific product based on the transaction type. •
Extenuating circumstances are created by non‐recurring events out of the borrower’s control that cause a reduction in income or increase in liabilities and are not defined solely by an event (i.e. a job layoff or divorce is not acceptable by itself without an explanation and documentation of the lack of reasonable options), and there must be an interrelationship between the event, the severity of the hardship and the borrower’s efforts to resolve the situation. •
If extenuating circumstances contributed to the borrower’s financial hardship causing one of the above events to occur then the following combined time elapse since a short sale and LTV/TLTV/HTLTV guidelines apply: •
Two (2) years, and •
maximum 90% LTV/TLTV/HTLTV. •
Notes: •
If the LTV is greater than 80%, MI guidelines apply. •
The maximum LTV/TLTV/HTLTV is limited to the lesser of the LTV/TLTV/HTLTV as outlined above or the maximum LTV/TLTV/HTLTV for the specific product based on the transaction type. •
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After a short sale the borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period and the related LTV requirements are met. •
The borrower meets all other credit requirements outlined in the product guidelines. •
The borrower has traditional credit. Non‐traditional credit or “thin files” are not acceptable. If there is evidence of a deficiency judgment by the lender, MI company, or investor against the borrower for the charged‐off amount and there is a secured or unsecured promissory note for the deficiency balance, the payment must be included in the debt ratio calculation. Fannie Mae DU •
Non‐AUS guidelines apply, except as follows: •
The waiting period begins on the completion date (date short sale is executed) and ends on the disbursement date of the new loan. •
Standard DU LTV/TLTV/HTLTV guidelines apply. •
Short sales must be completed four or more years from the disbursement date of the new loan, or two or more years from the disbursement date of the new loan when documentation is obtained that the borrower had an extenuating circumstance and all other short sale guidelines are met. •
The borrower’s credit will be considered re‐established if all of the following are met: •
The waiting period requirements are met. Last Revision Date: 9/19/14 (Correspondent) Page 6 of 8 Revised Guidelines Effective for NEW Loan Applications ON OR AFTER September 22, 2014 is obtained that the borrower had an extenuating circumstance and all other short sale guidelines are met. The following combined time elapse since a short sale and LTV/TLTV/HTLTV guidelines apply. •
Two (2) years but less than four (4) years, the maximum LTV/TLTV/HTLTV is 80%. Four (4) years but less than seven (7) years, the maximum LTV/TLTV/HTLTV is 90%. •
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Seven (7) years or greater, then the maximum LTV/TLTV/HTLTV is per product guidelines. Extenuating circumstances are created by non‐recurring events out of the borrower’s control that cause a reduction in income or increase in liabilities and are not defined solely by an event (i.e. a job layoff or divorce is not acceptable by itself without an explanation and documentation of the lack of reasonable options), and there must be an interrelationship between the event, the severity of the hardship and the borrower’s efforts to resolve the situation. If extenuating circumstances contributed to the borrower’s financial hardship causing •
one of the above events to occur then the following combined time elapse since a short sale and LTV/TLTV/HTLTV guidelines apply: •
Two (2) years, and •
maximum 90% LTV/TLTV/HTLTV. Notes: •
If the LTV is greater than 80%, MI guidelines apply. •
The maximum LTV/TLTV/HTLTV is limited to the lesser of the LTV/TLTV/HTLTV as outlined above or the maximum LTV/TLTV/HTLTV for the specific product based on the transaction type. •
•
After a short sale the borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period and the related LTV requirements are met. •
The borrower meets all other credit requirements outlined in the product guidelines. •
The borrower has traditional credit. Non‐traditional credit or “thin files” are not acceptable. If there is evidence of a deficiency judgment by the lender, MI company, or investor against the borrower for the charged‐off amount and there is a secured or unsecured promissory note for the deficiency balance, the payment must be included in the debt ratio calculation. Fannie Mae DU •
Non‐AUS guidelines apply, except as follows: The waiting period begins on the completion date (date short sale is executed) and ends on •
the disbursement date of the new loan. •
Standard DU LTV/TLTV/HTLTV guidelines apply. Short sales must be completed four or more years from the disbursement date of the new •
Significant Derogatory Credit Event Updates and Retirement of Certain Special Feature Codes (SFCs) Topic Impacted Document Impacted Products •
Current Guidelines Effective for Loan Applications PRIOR TO September 22, 2014 •
The loan receives an “Approve/Eligible” recommendation from DU. •
The borrower meets all other credit requirements outlined in the product guidelines. When there is conflicting or inaccurate foreclosure information provided on a short sale credit report tradeline, the underwriter may instruct DU to disregard the conflicting or inaccurate information. Click here for DU instructions. Freddie Mac LP •
The waiting period begins on the completion date (date short sale is executed) and ends on the application date of the new loan. •
The following combined time elapse since a short sale and LTV/TLTV/HTLTV guidelines apply. •
If the short sale was due to financial mismanagement, four (4) years but less than seven (7) years, the maximum LTV/TLTV/HTLTV is the lesser of 90% or the maximum LTV/TLTV/HTLTV per the transaction type. For seven (7) years or greater, then the maximum LTV/TLTV/HTLTV is per product guidelines. •
If the short sale was due to extenuating circumstances, two (2) years but less than seven (7) years, the maximum LTV/TLTV/HTLTV is the lesser of 90% or the maximum LTV/TLTV/HTLTV per the transaction type. For seven (7) years or greater, then the maximum LTV/TLTV/HTLTV is per product guidelines. •
The following additional requirements apply, for both financial mismanagement and extenuating circumstance causes: •
The purchase of a primary residence is permitted. •
Limited cash‐out refinance transactions are permitted for all occupancy types. •
The purchase of a second home or investment property is not permitted. •
Cash‐out refinance transactions (all occupancy types) are not permitted. •
If financial mismanagement contributed to the borrower’s financial hardship causing a short sale to occur, the file must contain all of the following documentation: •
An underwriting analysis on Form 1077, Uniform Underwriting and Transmittal Summary, or on a separate document in the loan file, relating the borrower's explanation to the loan file documentation and leading to a reasonable conclusion that the financial mismanagement is unlikely to recur and the borrower's credit reputation is acceptable. •
The borrower has reestablished an acceptable credit reputation. The borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period and the related LTV and occupancy requirements are met. •
The loan receives an “Accept/Eligible” recommendation from LP. •
The borrower meets all other credit requirements outlined in the product guidelines. •
Evidence on the credit report and other credit documentation in the loan file of the length of time since completion of the short sale to the date of the application, and of completion of the waiting period requirements outlined above. •
If extenuating circumstances contributed to the borrower’s financial hardship causing a short sale to occur, the file must contain all of the following documentation: •
A written statement from the borrower attributing the cause of the financial difficulties to outside factors beyond the borrower's control that are not ongoing and are unlikely to recur. •
Third‐party documentation confirming that the events related by the borrower in the explanation were an isolated occurrence and significantly reduced the borrower's income and/or increased expenses and rendered the borrower unable to repay as agreed. •
An underwriting analysis on Form 1077, Uniform Underwriting and Transmittal Summary, or on a separate document in the loan file, relating the borrower's explanation to the loan file documentation and leading to a reasonable conclusion that: •
The events causing the financial difficulties were beyond the borrower's control, are not ongoing and are unlikely to recur; and Last Revision Date: 9/19/14 (Correspondent) Page 7 of 8 •
•
Revised Guidelines Effective for NEW Loan Applications ON OR AFTER September 22, 2014 loan, or two or more years from the disbursement date of the new loan when documentation is obtained that the borrower had an extenuating circumstance and all other short sale guidelines are met. The borrower’s credit will be considered re‐established if all of the following are met: •
The waiting period requirements are met. •
The loan receives an “Approve/Eligible” recommendation from DU. •
The borrower meets all other credit requirements outlined in the product guidelines. When there is conflicting or inaccurate foreclosure information provided on a short sale credit report tradeline, the underwriter may instruct DU to disregard the conflicting or inaccurate information. Click here for DU instructions. Freddie Mac LP •
The waiting period begins on the completion date (date short sale is executed) and ends on the application date of the new loan. •
The following combined time elapse since a short sale and LTV/TLTV/HTLTV guidelines apply. •
If the short sale was due to financial mismanagement, four (4) years but less than seven (7) years, the maximum LTV/TLTV/HTLTV is the lesser of 90% or the maximum LTV/TLTV/HTLTV per the transaction type. For seven (7) years or greater, then the maximum LTV/TLTV/HTLTV is per product guidelines. •
If the short sale was due to extenuating circumstances, two (2) years but less than seven (7) years, the maximum LTV/TLTV/HTLTV is the lesser of 90% or the maximum LTV/TLTV/HTLTV per the transaction type. For seven (7) years or greater, then the maximum LTV/TLTV/HTLTV is per product guidelines. •
The following additional requirements apply, for both financial mismanagement and extenuating circumstance causes: •
The purchase of a primary residence is permitted. •
Limited cash‐out refinance transactions are permitted for all occupancy types. •
The purchase of a second home or investment property is not permitted. •
Cash‐out refinance transactions (all occupancy types) are not permitted. •
If financial mismanagement contributed to the borrower’s financial hardship causing a short sale to occur, the file must contain all of the following documentation: •
An underwriting analysis on Form 1077, Uniform Underwriting and Transmittal Summary, or on a separate document in the loan file, relating the borrower's explanation to the loan file documentation and leading to a reasonable conclusion that the financial mismanagement is unlikely to recur and the borrower's credit reputation is acceptable. •
The borrower has reestablished an acceptable credit reputation. The borrower’s credit will be considered re‐established if all of the following requirements are met: •
The waiting period and the related LTV and occupancy requirements are met. •
The loan receives an “Accept/Eligible” recommendation from LP. •
The borrower meets all other credit requirements outlined in the product guidelines. •
Evidence on the credit report and other credit documentation in the loan file of the length of time since completion of the short sale to the date of the application, and of completion of the waiting period requirements outlined above. •
If extenuating circumstances contributed to the borrower’s financial hardship causing a short sale to occur, the file must contain all of the following documentation: •
A written statement from the borrower attributing the cause of the financial difficulties to outside factors beyond the borrower's control that are not ongoing and are unlikely to recur. •
Third‐party documentation confirming that the events related by the borrower in the explanation were an isolated occurrence and significantly reduced the borrower's income and/or increased expenses and rendered the borrower unable to repay as agreed. Significant Derogatory Credit Event Updates and Retirement of Certain Special Feature Codes (SFCs) Topic Impacted Document Impacted Products •
Current Guidelines Effective for Loan Applications PRIOR TO September 22, 2014 •
The borrower has reestablished an acceptable credit reputation. The borrower’s credit will be considered re‐established if all of the following requirements are met: • The waiting period and the related LTV and occupancy requirements are met. • The loan receives an “Accept/Eligible” recommendation from LP. • The borrower meets all other credit requirements outlined in the product guidelines. •
Evidence on the credit report and other documentation in the Mortgage file of the length of time since completion of the short sale to the date of application and of completion of the waiting period requirements outlined above. If not clearly identified on the credit report, the borrower must provide a complete copy of the short sale documents to establish the completion date of the short sale. Note: LP may not, in all instances, be able to identify a short sale in the credit report data. As a result, the above referenced short sale guidelines may have to be evaluated outside of LP. •
Revised Guidelines Effective for NEW Loan Applications ON OR AFTER September 22, 2014 •
An underwriting analysis on Form 1077, Uniform Underwriting and Transmittal Summary, or on a separate document in the loan file, relating the borrower's explanation to the loan file documentation and leading to a reasonable conclusion that: •
The events causing the financial difficulties were beyond the borrower's control, are not ongoing and are unlikely to recur; and •
The borrower has reestablished an acceptable credit reputation. The borrower’s credit will be considered re‐established if all of the following requirements are met: • The waiting period and the related LTV and occupancy requirements are met. • The loan receives an “Accept/Eligible” recommendation from LP. • The borrower meets all other credit requirements outlined in the product guidelines. •
Evidence on the credit report and other documentation in the Mortgage file of the length of time since completion of the short sale to the date of application and of completion of the waiting period requirements outlined above. If not clearly identified on the credit report, the borrower must provide a complete copy of the short sale documents to establish the completion date of the short sale. Note: LP may not, in all instances, be able to identify a short sale in the credit report data. As a result, the above referenced short sale guidelines may have to be evaluated outside of LP. Last Revision Date: 9/19/14 (Correspondent) Page 8 of 8