Thursday, March 10, 2016

Example Underwriting Guidelines






UNDERWRITING GUIDELINES

____________________________________________________________________________________________________________________
CREDIT

1.  Credit Documents are to be no more than 60 days old at time of closing.

2.  Two repository in-file credit reports are acceptable for all credit grades. For quality control purposes a three-repository, in-file will be pulled by the lender.   Credit history will be reviewed for the most recent 12 month period. Credit history reported on a full residential mortgage credit report supplied by Correspondent overrides information reported on the in-file report.

3. A valid credit score requires a minimum of:
·      An established credit history of three (3) active trade lines, on credit report, that have been opened for at least twenty four (24) months (DLA within last 6 months acceptable).
            Note: 24 months utilization is determined by date account was opened on credit report
·      2 others of any type (Not derogatory).

4. Thin Credit Borrower
·      For borrowers who do not meet the trade line requirements, but do have:
o   At least one active 24 month account on the credit report
o   A complete 24 month housing history with 0X30(Cancelled checks if private)
o   And a minimum two credit scores, alternative credit histories may be used as follows:
§  A minimum of three alternative sources should be verified directly with the creditor or with 24 months cancelled checks showing no late payments
§  Alternative sources include utility payments, telephone payments, child support, cell phone, auto insurance, etc.
§  Alternative sources that are payroll deducted are not acceptable.
·      Maximum LTV is 80%. (CLTV maximum is not affected)
·      Not available for Extended Rent Free or Limited Pay History borrower
·      Must meet payment shock criteria
·      If borrowers had a previous BK or Foreclosure, they must qualify relative to active accounts since the BK.

5. The credit score used to determine credit grade is the lower of 2 or middle of 3 for the primary wage earner for all loan types except NINA.
·      Co-Borrower(s) have no minimum score requirement and no minimum trade line requirement, but will be evaluated based on body of credit.  
·      For NINA loans use the lower of 2 or middle of 3 for the borrower with the lowest score. (Non-primary wage earner has no minimum credit score requirement)
Detailed Score Requirements:


·      FULL DOC
o   620 Credit score required for Owner Occupied, for loan amounts up to $650,000. Purchase and Rate & Term up to 100% CLTV.
o   620 Credit score required for Owner Occupied, for loan amounts up to $650,000. Cash Out one loan up to 95% LTV
o   640 Credit score required for Owner Occupied, for loan amounts over $650,000. Purchase, Rate & Term and Cash Out up to 100% CLTV.
o   640 Credit Score required for Primary Residence Cash Out with CLTV >80% using SouthStar 2nd. Maximum 100% CLTV.
o   640 Credit score required for all 2nd Homes. Purchase, Rate & Term and Cash Out. Not to exceed 95% CLTV
o   680 Credit Score required for 2nd Home 100% CLTV (Purchase, Rate & Term & Cash Out)
o   680 Credit score required for Non Owner Occupied. Purchase, Rate & Term and Cash Out


·      SIVA, NIVA AND SISA
o   640 Credit score required for Owner Occupied & 2nd Homes w/LTVs =<80%
o   660 Credit score required for Owner Occupied Purch Rate & Term w/LTVs >80%
o   700 Credit score required for Owner Occupied Cash Out w/LTVs >80%
o   700 Credit score required for 2nd Home Purch Rate & Term w/LTVs >80%. NO Cash out over 80%
o   680 Credit score required for Non Owner Occupied. w/LTVs =<80%


·      SIVA, NIVA
o   700 Credit score required for Non Owner Occupied Purch Rate & Term w/LTVs >80%. NO Cash Out over 80%


·      NINA
o   640 Credit score required for Owner Occupied & 2nd Homes w/LTVs =<80%
o   660 Credit score required for Owner Occupied Purch Rate & Term w/LTVs >80%
o   700 Credit score required for Owner Occupied Cash Out w/LTVs >80%
o   700 Credit score required for 2nd Home Purch Rate & Term w/LTVs >80%. Up to 90% LTV. NO Cash Out
o   NO LTVs >80% allowed on 2nd Home Cash Out


6.  Monthly payments reflected on the credit report can be used to calculate the DTI ratios.  If no monthly payment is shown, 5% of the outstanding balance may be used. 

·      Installment debts, excluding car leases, with 10 months or less remaining and revolving debts to be paid off at closing need not be included in calculating the debt ratios.  Debts may not be paid down to 10 months. 
·      Co-signed debts will not be counted if sufficient proof in the form of six months canceled checks is provided that demonstrates the primary debtor makes the payments directly to the creditor.
·      Authorized user accounts will not be counted if sufficient proof can be provided in the form of six months canceled checks to verify the borrower is not responsible for the account.  Verification of “authorized user only” status given by the creditor is required.
·      Debt shown in a divorce decree as being the responsibility of ex-spouse will not be counted against borrower, including mortgages. 
·      Student loans will not be included in DTI with proof the loan is deferred a minimum of 12 months. 
·      Payments for loans secured by a 401K, life insurance, or other liquid asset accounts may be excluded from the DTI calculations. The borrower, however, may use the funds as their down payment without counting the debt in the borrower’s DTI.

7. The age of the foreclosure is calculated from the date reported or the date of the most recent 120 day mortgage late. 
·      Borrowers with a foreclosure, notice of default, deed in lieu, forbearance or settlement on a real estate secured trade line within the last 36 months are not eligible.
·      For LTVs over 80% borrowers cannot have foreclosure, notice of default, and deed in lieu, forbearance or settlement on a real estate secured trade line within the last 60 months.
·      Foreclosure criteria applies to all properties excluding Time Shares.
·      Re-established credit as outlined in BK criteria below applies to this borrower.

8.   Evidence of bankruptcy discharge must be provided.  If debts included in the bankruptcy are not clearly indicated on the credit report, all bankruptcy papers must be provided including the petition and the list of creditors.
·      The look back period for Chapter 7, 11, and 13 bankruptcies is 24 months and all must be discharged or dismissed for a minimum of 24 months.
·      For LTVs over 80% borrowers cannot have bankruptcies discharged or dismissed within the last 60 months.
·      Re-established credit after a bankruptcy is important for this type of borrower. As a minimum this consists of 3 trade lines with 24 months utilization, one of which must have been active within the past 6 months. (Other accounts could be satisfied or closed out accounts that were not included in the BK or those re-established after the BK).
·      Thin credit borrowers are also eligible, but must still meet re-established credit criteria noted above.


9. Consumer Credit Counseling will be treated the same as bankruptcy with 24 months seasoning since termination and/or satisfaction date. For LTVs over 80% borrowers must have 60 months seasoning since termination and/or satisfaction date.

10. All collections, charge-offs and judgments less than 24 months old, must be paid off at closing. Exceptions to this guideline will be allowed if the balance of an individual account is less than $250 or if the total balance of all accounts is $1000 or less. 

  • Medical Collections will be reviewed on a case by case basis if proof can be provided that they were disputed with an insurance company.
  • All judgments and liens that affect title, or items that have the potential to affect title, must be paid at closing.
  • 90 day delinquent accounts will be considered a collection and must be paid current at closing. 
  • Any open tax lien must be paid in full, regardless of date or location of filing.


11. Residential Pay history

Verification of Mortgage/Rental is required on all loans. 
·      Current balance, current status and payment amount must be verified for the prior 12 months from application date.
·      Reported mortgage history, including history >12 months will be considered and must meet the following credit criteria:
o   0X30 in last 12 months
o   0X60 in last 24 months


Mortgage history must be verified by the following:
·      A 12 month rating stated on a RMCR or merged in-file credit report.
·      Verification of Mortgage completed by a financial institution
·      Copies (front and back) of the last 12 months consecutive mortgage payment cancelled checks. (only 1 payment per month allowed)
·      Bank statements or direct payment records


Rental History
·      VOR completed by a management company or apartment complex that can be verified.
·      Copies (front and back) of the last 12 months consecutive mortgage payment cancelled checks. (only 1 payment per month allowed)



12. Borrowers unable to provide a complete 12 month mortgage/rental history:

Limited Rent Free
·      Only up to the most recent 6 months can be rent free
·      Borrower must still provide a 12 months residential pay history covering period up to rent free status.
·      No LTV/CLTV reduction
·      Must meet Payment Shock criteria using the most recent residential payment on all but Full Doc


     Limited Pay History
·      Borrower must be able to provide a minimum of 6 months history with a VOR/VOM, (cancelled checks if private) and are limited to:
o   Primary residence only
o   Full Doc, SIVA and NIVA programs with 90% max LTV/CLTV
o   No SISA or NINA
o   6 months PITI reserves, seasoned for 60 days
o   NOT available for Thin Credit borrower
o   Must meet Payment Shock criteria using the most recent residential payment on all but Full Doc


Extended Rent Free
·      Currently rent free, but had a previous residential pay history
·      Must verify previous residential pay history with a VOR/VOM or Credit Report
·      Limited to Full Doc, SIVA and NIVA
·      Owner Occupied Primary
·      NOT available on Thin Credit Borrower
·      Must meet Payment Shock criteria using the most recent residential payment on all but Full Doc
·      Maximum LTV 80% and 90% CLTV


Free & Clear Borrowers

·      Borrowers who have no residential pay history due to paying off their mortgage within the last 12 months
o   Borrower must still provide 12 months residential pay history covering period up to date balance was paid.
o   ALL Doc Types
o   Owner Occupied, 2nd Homes and  Non Owner Occupied
o   No LTV/CLTV reduction
o   Must meet Payment Shock criteria using the most recent residential payment on all but Full Doc

·      Borrowers who have no residential pay history due to paying off their mortgage over 12 months ago.
o   Must verify previous residential pay history with a VOM or Credit Report
o   Limited to Full Doc, SIVA or NIVA
o   Owner Occupied, 2nd Homes and Non Owner Occupied
o   Maximum 80% LTV and 90% CLTV
o   Must meet Payment Shock criteria using the most recent residential payment on all but Full Doc

13. Payment Shock (new pmt vs. old pmt) On SIVA, NIVA, SISA and NINA programs may not exceed the current monthly payment by more than:
·      One and one half (1.5) times current housing payment if CLTV is >80% on SISA and NINA. If =<80% two(2) times current housing payment on SISA and NINA
·      Two (2) times current monthly housing payment on SIVA and NIVA regardless of CLTV
·      A maximum payment shock of 3 times current monthly housing is available on an a case-by-case basis with 6 months verified reserves on SIVA and NIVA
·      Payment shock is calculated, using PITI, as follows: new payment–old payment/old payment.  (Ex. New payment $2500/mth, old payment $1000/mth,  $2500-1000/1000= 1.5)
·      Payment shock is not considered on second homes and investment property; however investment property must evidence cash flow sufficient to cover the debt service of the property via tax returns or executed leases.
·      Payment shock is not considered on Full doc, but will be considered as part of the overall credit profile.

14. Consumer credit requirements:
·      LTV/CLTV =< 90%, disregard consumer credit within past 12 months.
·      LTV/CLTV > 90%, maximum 0x60 or greater in the last 12 months.

INCOME

  For all credit grades borrowers must provide evidence of two years stable employment/income history.

See separate income section for special requirements of relocating borrower.

The following income criterion applies to Full income loans. 

Salaried Borrowers:

·      2 years employment history required in the same business.
·      Written VOE or pay stubs covering most recent 30 day period with YTD earnings
·      2 years W-2’s
·      Verbal VOE at time of closing.
·       Note:  Reliance upon a VOE for an applicant employed by a relative or by a company controlled by the borrower or a close relative is not acceptable.  VOE’s will also not be acceptable as stand-alone documentation from companies without Human Resources departments.
Self-Employed Borrowers:

·      2 years self employment required
·      2 years tax returns, including all schedules
·      Borrowers who are primarily (>25%) commissioned must provide the prior two years federal tax returns
·      2 years business tax returns (if applicable, required if borrower owns 25% or more of business)
·      A signed IRS form 4506T will be required at time of underwriting
Alimony/Child Support:

·      3 year continuance must be documented
·      Income must have been received on a regular basis for the last 6 months
·      6 months bank statement or canceled checks to document receipt of income
·      Copy of divorce decree or separation agreement to verify income and continuance
·      For Alimony, prior 1 years tax returns to confirm receipt



Car Allowance:
·      Proof of receipt of income for a minimum of one year is required
·      Monthly income can be washed against car payment; any positive result can be added to income, negative result added to debt.
Housing Allowance:

·      May be used as income for members of the military or clergy only.
·      Clergy must demonstrate a 2 year history of receipt in the form of Tax Returns or W2s.
·      Must prove it will continue for a minimum of two years.

Bonus:
·      2 Year history required
·      Verified by pay stubs, W-2’s and VOE verifying continuance of bonus income

Commission:
·      Verified by pay stubs, W-2’s and VOE verifying continuance of commission income
·      If commission income exceeds 25% of total income, borrower must provide 2 years signed tax returns

Overtime:
·      2 Year history required
·      Verified by pay stubs, W-2’s and VOE verifying continuance of overtime income

Part Time/Second Job:
·      Verified by pay stubs, W-2s and minimum of verbal VOE
·      Borrower must document a 2 year history of working a part-time/second job and seasonal income

Seasonal Income:
·      Seasonal employment income, such as farm labor or construction labor will be considered if it is property documented and consistent for a minimum of two years.
·      Unemployment income may also be used if documentation shows that it has been received for a specified length of time during the previous two years
·      Must prove a likelihood that it will continue



Military Income:
·      Flight or hazard pay, rations, clothing allowance, quarters allowance, proficiency pay and hardship pay can be used for income
·      Any non-taxed income can be grossed up 25%.

Rental Income:
·      Maximum number of rental properties allowed is 10 for any one borrower
·      Properties owned less than 1 year or purchase, use Seventy-Five percent (75%) of the lesser of actual rents or market rents
·      If Six (6) or less properties are owned 1 or more years use ninety percent (90%) of actual rents or 1040 tax returns Schedule E
·      If more than six (6) properties are owned 1 or more tax years use 1040 tax returns schedule E.
·      A new lease put on a borrower’s current residence cannot be used as income.  Using the above calculation, if a positive calculation occurs, SouthStar will only offset the mortgage against that property. A copy of the executed lease and security deposit is required on all programs to include Full Doc, Stated and No Income.

Foster Care Income:
·      Receipt of such income must be verified for the prior 24 months and evidence of current receipt from the appropriate foster care agency is required. 
·      Receipt of income must be likely to continue in the future.
·      Income will be calculated based on the current receipt amount.


Notes Receivable:
·      Copy of the executed note and recorded mortgage (if applicable) should be obtained
·      Proof of receipt of income for prior 12 months must be documented by bank statements or canceled checks
·      A minimum of 3 years income continuance is required


Dividends/Interest Income:
·      2 years signed tax returns with all schedules are required
·      Assets must be verified to demonstrate the likelihood of continuance of such income
·      Reserves after closing should be sufficient to continue generating income.
Retirement/Pension:

·      Most recent 2 months bank statements, recent 1099 or check stubs to verify receipt of income
·      Award letter or other verification to verify 3 years income continuance.

Social Security:

·      Most recent 2 months bank statements or copies of checks to verify receipt of income
·      Award letter
·      The non-taxed portion of fixed income such as social security, VA benefits, pension and annuity income can be grossed up 25% to qualify.
·      Social security income paid to the surviving children of a deceased spouse must continue for a minimum of 3 years. 
·      Social security for dependent children may not be grossed up and must continue for a minimum of 3 years.

Disability Income:

·      Permanent disability must be verified by copy of award letter verifying 2 years continuance
·      Most recent 2 months bank statements or check stubs verifying receipt of income
·      Temporary disability can be used provided a letter from the employer is obtained verifying the borrower will receive disability benefits as long as he or she remains disabled and when no longer disabled, the employee will return to work at his or her previous position at the same rate of pay
·      Temporary disability income amount should be verified by copy of award letter and most recent check stub or bank statement verifying deposit



Trust Income:

·      Verification includes a copy of the original trust agreement and 1040's for the most recent 2 year period. 
·      Income must continue for 3 years.




Unemployment Benefits:
·      Seasonal unemployment income may be used if a two year history is established
·      2 years tax returns and 1099’s to document income must be provided
·      Verification must be obtained from the employer that fluctuations are normal for the industry along with verification that the borrower is currently working
·      Unemployment income should be averaged using the last 2 years and added to income.


Unacceptable Sources Of Income Include:
·      Income not reported to the IRS
·      One time capital gains
·      Boarder income
·      Educational benefits
·      Income tax refunds
·      Food Stamps
·      Welfare
·      VA schooling benefits

Borrowers who do not complete IRS form 1040 will not be considered for application unless they meet non-permanent resident alien status or foreign national status.

 

 

Additional income requirements for the relocating borrower.


  1. W2 Full Doc.
·      Relocating with same company
§  Past two Yrs W2
§  Written VOE or detailed acceptance letter
§  2 most recent pay stubs, one of which must be from new location


·      Relocating to new job/company.
§  Past two Yrs W2
§  Written VOE or detailed acceptance letter
§  Most recent pay stub from new employment
§  Job must be same line of work and same pay structure as previous employment. With no excessive gap in employment

Note: SIVA, NIVA & SISA borrowers are documented as outlined in the PROGRAM FEATURES income section, but must have started employment at location. Verbal verification required.

  1. Self Employed Full Doc Borrower (Contract employee)
·      Relocating with same company
§  Past two Yrs Tax Returns
§  Detailed acceptance letter
§  2 most recent pay stubs, one of which must be from new location

·      Relocating to new job/company.
§  Past two Yrs Tax Returns
§  Detailed acceptance letter
§  Most recent pay stub from new employment
§  Job must be same line of work and same pay structure as previous employment with reasonable proof that client base will remain the same. With no excessive gap in employment

  1. Self Employed Full Doc (Business owner)
    • Past two Yrs Tax Returns
    • YTD P&L statement
    • Letter from CPA that borrower can maintain income in new location, subject to SouthStar.
    • Source of income must be nationally based rather than local (i.e., Author, WEB designer, or type of business is not limited to a specific locale). If unable to document, income is not eligible.

Note:
  • SIVA, NIVA & SISA Self Employed borrowers are documented as outlined in PROGRAM FEATURES income section.
  • Contract borrowers must have started employment.
  • Verbal verification required.

PROGRAM FEATURES





Stated Income – Verified Assets (SIVA)
·      Signed and dated FNMA 1003 with employment and income stated
·      2 Years employment history required
·      Income must be reasonable for employment
·      Verbal VOE(s) prior to closing for salaried borrowers covering 2 years same line of work.
·      CPA certification or business license for self employed borrowers to cover a 2 yr history
·      Fixed Income borrowers require 2 Years  “blacked Out” awards letter or 1099
·      Written Verification of Deposit (VOD) with two (2) months average balance or most recent two (2) months bank statement (If bank statements show automatic income deposits, only a VOD will be acceptable)
·      NO 4506T required
·      Reserve Requirements
o   2 months PITI for Owner Occupied
o   6 months PITI for Second Home and Investment Properties
·      Escrows for Taxes and Ins. required. Waived on loans < 80% with additional pricing.








No Income – Verified Assets (NIVA)
·      Signed and dated FNMA 1003 with employment but NO income stated
·      2 Years employment history required
·      Verbal VOE(s) prior to closing for salaried borrowers covering 2 years same line of work.
·      CPA certification or business license for self employed borrowers to cover a 2 yr history
·      Fixed Income borrowers require 2 Years  “blacked Out” awards letter or 1099
·      Written Verification of Deposit (VOD) with two (2) months average balance or most recent two (2) months bank statement. (If bank statements show automatic income deposits, only a VOD will be acceptable)
·      NO 4506T required
·      Reserve Requirements
o   2 months PITI for Owner Occupied
o   6 months PITI for Second Home and Investment Properties
·      Escrows for Taxes and Ins. required. Waived on loans < 80% with additional pricing.





Stated Income – Stated Assets (SISA)
·      Signed and dated FNMA 1003 with employment, income and assets stated
·      2 Years employment history required
·      Verbal VOE(s) prior to closing for salaried borrowers covering 2 years same line of work.
·      CPA certification or business license for self employed borrowers to cover a 2 yr history
·      Fixed Income borrowers require 2 Years  “blacked Out” awards letter or 1099
·      Borrower must state sufficient assets to cover down payment, closing costs and required reserves
·      Certified funds required for closing must be drawn on bank(s) listed on application as source of funds
·      NO 4506T required
·      Reserve Requirements
o   2 months PITI for Owner Occupied
o   6 months PITI for Second Home and Investment Properties
·      Escrows for Taxes and Ins. required. Waived on loans < 80% with additional pricing.



No Income – No Assets (NINA)
·      Signed and dated FNMA 1003 with no employment, income and assets stated
·      NO ratios calculated
·      Day time and evening telephone numbers must be on 1003 application
·      NO 4506T required
·      Field Review required
·      Escrows for Taxes and Ins. required. Waived on loans < 80% with additional pricing.


ASSETS

Assets are to be properly verified on purchase money transactions and, where applicable, on rate/term refinances.



1. Acceptable sources of funds include the following:

·      *Borrowers required assets must be sourced and seasoned for a minimum of 60 days. If verification shows a recent increase in the average balance, or if account has been opened in the past 60 days, the funds in the account must be documented.
  • On all transactions reserves must be sourced and seasoned for the prior 2 months on Full Doc, SIVA and NIVA loans and stated for SISA loans as follows:
o    (2) months PITI required for Owner Occupied Primary Residence
o   Six (6) months PITI for Second Homes and Investment Properties
  • Sale of personal property with proper documentation
  • *IRA/Keogh/SEP accounts
  • Repayment of loan (need copy of note and evidence of disbursement of original funds.
  • *401K accounts. Loans secured by a 401K will not be counted in the borrower’s debt ratio.
  • Loans secured by asset with proper documentation.  Debt must be included in DTI.
            *Funds must be fully documented.


2. Unacceptable sources of funds include the following:
·      Loans not secured by an asset
·      Sweat equity
·      Credit card advances
·      Tax free exchanges
·      Cash on hand
·      Real Estate Commission
·      Sweat Equity or materials furnished by borrower that is not part of a pre-closing agreement with the builder.



Secondary Financing

 

  • Seller secondary financing is NOT permitted under the Easy Doc program.
  • Institutional secondary financing is available as long as it meets CLTV & DTI% requirements for grade/LTV & program. In the case of a refinance, the subordinate lien holder must execute a subordination agreement.
  • Government down payment assistance programs & community grants are allowed under
 this program as long as it meets LTV/CLTV requirements for grade/LTV & program.
1% of the grant will be used to determine payment. 


  1. SSF 2nd Financing:  In conjunction with SSF holding the first lien. 
    • Up to a maximum 100% CLTV available unless otherwise noted.
    • Minimum loan amount of $20,000.
    • Maximum loan amount of $250,000
    • Up to $1,000,000 combined loan amount.       
    • Max seller concessions per guidelines.
    • SSF will not hold 2nd liens on cash out refinances on SIVA, NIVA, SISA, NINA, non-owner occupied properties or on combined loan amounts over $1,000,000. 
    • No MI required on the 2nd.
    • Priced as 15 yr fixed or 30/15 balloon where allowed.
    • No YSP or fees allowed on 2nds.
    • Soft PPP on both 1st & 2nd liens.
    • Follow first lien guidelines.




a.     Full Doc / SIVA / NIVA / SISA Program.
·      620 middle credit score for primary wage earner on Full Doc loans up to $650,000 loan amount
·      640 middle credit score for primary wage earner on Full Doc loans over $650,000 loan amount
·      640 middle credit score for primary wage earner on all other Doc types
·      Owner occupied properties
·      Property types:  SFD, attached/detached, town homes and condos.
·      2 Unit properties eligible for 100% CLTV except on SISA and NINA
o   If 2 Unit purchase transaction, previous residence must be sold prior to or simultaneously with SouthStar loan
·      Max CLTV on 3-4 units (All programs) & 2 Unit SISA and NINA is 95%. 
·      Purchase & Rate/Term transactions.
·      Cash Out Combo available on FULL DOC only up to 100% CLTV with 640 middle score. SFD, Atch., Condo and 2 Unit
·      See 2nd mortgage matrix for loan amounts.




Note:  2nd home combos available with the following:
·      640 middle score for CLTV < 95%.
·      680 middle score for CLTV > 95% to 100%.
·      100% CLTV available only on 80/20 combinations
·      2-4 units not available as 2nd homes.
·      Purchase & Rate/Term transactions.
·      Cash Out ok on Full Doc


b. NINA Program
·      640 middle credit score for CLTV < 95%.
·      680 middle credit score for CLTV > 95% to 100%.
·      Credit score used to determine credit grade is the lower of 2 or middle of 3 for the borrower with the lowest score.
·      Owner occupied properties.
·      Property types; SFD, attached/detached, town homes, and condos.
·      Max CLTV on 2-4 units: 95%.
·      Purchase & Rate/Term transactions only.
·      No 2nd home combos allowed.
·      See 2nd mortgage matrix for loan amounts.


Earnest Money

·      Earnest money must be documented by canceled check on all programs
·      If earnest money is >1% must be sourced and seasoned for 60 days on all programs that require verified assets.
·      Escrow letters from appropriate parties are acceptable for funds on deposit > 60 days.


Gift Funds

·      Available on all Full Doc, SIVA and NIVA under the following conditions:
o   Funds must come from an immediately family member.
o   For loans with an LTV of 80% or less, the entire down payment may be in the form of a gift.
o   For LTV/CLTV > 80% use of gift funds are allowable as long as borrower contributes 5% of own funds (sourced and seasoned for 60 days)
o   The donor must execute a gift letter stating the donor’s name, address, relationship to the borrower, amount of gift and that no repayment is expected.
o   Verification of the transfer of gift funds is required.
·      Not applicable on SISA or NINA
·      Payment shock criteria and verified residential pay history still applies to this transaction


Gift of Equity

A gift of equity on Full Doc, SIVA and NIVA must meet the following conditions to be considered:
·      It must be an immediate family member giving the property to their relative.
·      A payoff letter must be provided to prove that the current loan on property is current.
·      Field review required.
·      The donor cannot be a builder. 
·      Maximum LTV 80%.
·      Payment shock criteria and verified residential pay history still applies to this transaction

Inherited Properties


If a mortgaged property was inherited within the last twelve (12) months, the following restrictions apply:

  • Must have clear title
  • If paying off existing mortgage loan and other heirs the maximum LTV is 80%
  • If Cash Out maximum LTV is 70%
·      Payment shock criteria and verified residential pay history still applies to this transaction


Seller Contributions  (Cannot be applied to Prepaids)


  • Primary Residence
    • Loans with MI
      • LTV/CLTV   >90%  = 3%
      • LTV/CLTV =<90%  = 6%
    • Loans without MI
      • 100% combos with credit score => 640  = 6%
      • 100% Combos with credit score   <640  = 3%
      • =<95% combos (any combination) = 6%
      • LTV/CLTV =<75%  = 9%

  • Second/Vacation Home
    • Loans with MI
      • LTV/CLTV   >90%   = 3%
      • LTV/CLTV =<90%   = 6%
    • Loans without MI
      • Any LTV/CLTV = 6%

  • Investment Property
    • Maximum 2% regardless of LTV/CLTV

Construction to Perm

Permanent financing to a borrower for the purpose of replacing interim financing used to fund the construction of a new residence (rate/term refinance only). 
  • The construction loan must be in borrower’s name. 
  • Proceeds from the loan can only go towards the pay-off of the construction loan and closing costs. 
  • The LTV will be based on the appraised value with a maximum LTV/CLTV of 90%.


Arms Length Transaction

An Arms length transaction occurs when the parties involved are entirely independent of one another. That is, all parties deal with one another as strangers and have no reason to collude

Non-Arms Length Transaction

Non-Arms Length Transactions are not acceptable transactions except under the following scenarios or case-by-case situations approved by SSF management.

  • A non-arms length transaction is one in which the parties to the loan and/or the sales transaction are related or have a business relationship. Additionally, in purchase transactions where the seller is a corporation, partnership or any other business entity, the client must ensure that the borrower is not an owner of the business entity selling the subject property


·      In the case of the Borrower/builder, or an employee, relative or business associate of the builder will be reviewed on a case-by-case basis. The Client must document the cost of the material and labor plus the value of the lot. Builder’s profit is not an allowable cost in a non-arm’s length transaction. If the lot was purchased less than twelve (12) months prior to the date of the loan application, the value of the lot will be based on the lower of the purchase price or land value as indicated on the appraisal report.


  • In some cases, non-arms length transactions may be acceptable, such as when a parent sells a house to a child (Gift of Equity Criteria) or when a relative inherits a home (Inherited Criteria).

Examples of a Non-Arms Length Transaction:

  • Purchasing subject property from a current landlord where a lease option to purchase has not been executed prior to occupancy
  • Broker/Realtor (or an employee of the broker/realtor is the seller or borrower)
  • Employer has provided any of the funds through an advance of funds. If the employer is a national company providing funds to the borrower through a relocation program, the transaction would typically not be considered non arms length
  • Purchasing subject property from employer
  • Employees, subcontractors or family members of builders or developers who are purchasing a property from the builder or developer.

Note: Transactions involving Borrowers/Builders refinancing new construction as investor properties are not eligible.

3. Installment Land Contract/Contract for Deed - Recorded

  • If recorded for less than 12 months it must be treated as a purchase and cancelled checks must be provided. The value will be based on the lower of the purchase price or appraised value.
  • If Borrower has occupied the subject property and paid on the contract for more than 12 months, use the appraised value to determine LTV and treat as a refinance transaction.
  • 12 months cancelled checks must be provided.
  • NO Cash Out
  • Three day right of rescission applies
  • Owner Occupied / Primary Residence only

4. Lease Purchase

  • With less than 12 months seasoning the value will be based on the lower of the purchase price or appraised value and will be treated as a purchase transaction. The LTV will be based on the lesser of the new appraised value or the purchase price.
·      If Borrower has occupied the subject property and paid on the contract for more than 12 months, use the appraised value to determine LTV and treat as a refinance transaction.
o   Will require a 3 day rescission period.
o   Maximum financing shall be limited to the original purchase price. 
o   Canceled checks evidencing timely payments to the seller are required to use full-appraised value in determining LTV. A VOM from a 3rd party management company may be used if stated in the lease/purchase contract and can be verified as a licensed management company.
o   Owner Occupied primary residence properties only.
o   No Cash out allowed on this program.


Purchase Transaction

Loans for the purpose of acquiring property must use the lesser of the purchase price or the appraised value whichever is less when calculating the LTV/CLTV.



Rate and Term Refinances

        Home-ownership less than 12 months:

·      Rate and term refinances will be based off of the appraised value. 
·      Appraised value increase of greater than 10% over the purchase price in the first 12 months will require a satisfactory field review by SouthStar Funding. 
·      Rate and term is defined as only paying off purchase money liens on property, reasonable and customary closing costs (including pre-paid items), including a maximum of 1% of the loan amount, not to exceed $2,000, as incidental cash, which may be returned to the borrower (except TEXAS loans).
·      No Cash-out allowed.

      A borrower that paid cash for a property is eligible for a cash-out refinance immediately
      under the following conditions:
·      Funds used to purchase property were borrower’s own funds and can be documented as seasoned for 60 days
·      LTV will be based off of the purchase price or appraised value, whichever is less
·      Maximum LTV/CLTV is 80%.
·      Residential pay history requirement still applies
·      Payment Shock criteria still applies
·      Must have been on title for a minimum 3 months

 

Cash-Out Refinances


·      Cash-out is defined as cash used for any purpose other than paying off any liens listed on title and customary closing costs on the subject property. LTV will be based on the appraised value when borrower has been on title at least 12 months.
·      Paying off Equity lines of credit (HELOC) with draws in the past 12 months greater than $2,000 or 1% of the Equity Line is considered a Cash Out. Additionally, the amount drawn over the limits must be included in the maximum cash back to the borrower.
o   Note: If over 12 months seasoning with no withdraws in the past 12 months, and borrower is not getting cash back would be considered a Rate  Term
·      If the borrower has been on title for less than 12 months, the LTV will be based off of the lower of the purchase price plus the added value of the documented improvements or appraised value.
·      Rehab property loans must have at least 12 months of seasoning before any refinance.
·      Cash Out maximums are based on: Doc Type, Property, LTV and Loan Amount. Refer to matrix for detailed information.

Debt to Income
The maximum DTI allowed is 50% except when LTV is over 80% then maximum is 45%

Additional Consumer Protections


  • SouthStar Funding explicitly prohibits the practice of flipping a consumer loan. A flip transaction is one in which a party purchases a property and re-sells the property within twelve (12) months of their purchase for an amount equal to or greater than 20% of the price paid by the seller. The twelve (12) months is calculated from the date purchased by the seller to date of ratified purchase contract.
    • Example: Individual purchases property for $50,000. Three months later, sells property to another individual for $90,000, an 80% profit.
  • SouthStar Funding will not make a refinance loan to a borrower when the new loan does not have reasonable, tangible net benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the borrower’s circumstances.
  • Every loan should make financial sense from the borrower’s perspective and full and complete documentation obtained. The following guidelines will be followed when reviewing a refinance transaction:

    • Total fees charged can not exceed what the borrower will receive as cash out. Cash out includes paying off of debts.
o   A rate and term refinance must have a monthly savings of at least $50.00 per month unless the borrower is changing from an adjustable rate to fixed rate or paying off a balloon note that is due in the next 12 months.
·      A refinance with less than 6 months since the last refinance will be reviewed on a case-by-case basis by SouthStar senior management.
o   Must be a benefit to the borrower
o   Must have at least 3 months of verifiable mortgage payments on current mortgage

Acceptable Borrowers:


U.S. Citizens who have reached the age of majority in the jurisdiction where the property is located.


-                                           Permanent Resident Alien – a permanent resident alien is a non-U.S. citizen who is legally able to maintain permanent residency in the United States.  For all of our loan programs, a resident alien may be eligible as a Borrower, if the following requirements are met:

l Borrower holds an alien registration card (“green card”)

l Borrower is employed by a U.S. company and has been for a minimum of two (2) years. (Does not apply to NINA)

l Borrower has an established asset base in the United States (for NINA program, provide a letter from banking institution confirming relationship).  Funds from outside the U.S. are not acceptable.

l   Borrower has a credit report from one of the three (3) major repositories (Trans Union, Equifax, Experian), demonstrating a minimum of two (2) years established credit.   



Non-Permanent Resident Alien – A non-permanent resident alien is a non-U.S. citizen who resides in the United States under the terms of a Visa. Applicants who meet the following criteria may be considered:

·      Limited to 90% CLTV on Full Doc
·      Limited to 80% CLTV on SIVA, NIVA, SISA and NINA
·      Single Family Primary Residence only
·       Must provide documented evidence of residency, a current H-1, L-1, or E-1 Visa.
·       Can verify probability of maintaining his or her current employment in the United States for three (3) years; and
·      Borrower is employed by a U.S. company and has been for a minimum of two (2) years.
·       Borrower has an established asset base in the United States.  Funds from outside the U.S. are not acceptable.
·      Borrower has a credit report from one of the three (3) major repositories (Trans Union, Equifax, Experian), demonstrating a minimum of two (2) years established credit
·       Borrower’s credit bureau report contains a Credit Score (also known as “FICO Score,” “Beacon” or “Empirica

Foreign Nationals – Citizens of another country who periodically visit the U.S. and who are buying a home in which to reside during these visits.  Foreign nationals with diplomatic immunity are not eligible for financing.
·      Purchase Only
·      Available on SIVA only
·      Maximum 75% CLTV
·      Foreign nationals are limited to a maximum of one (1) loan or property financed (excluding primary residence in home country). (Max of 10 properties does not apply)
·      If the borrower does not have a tax ID number or social security number, a copy of the Certificate of Foreign Status (IRS form W-8 BEN) must be retained in the file.
·      A credit score is not required.
·      Taxes and insurance must be escrowed.
·      If the credit report does not provide for a minimum of three (3) credit references that are at least two (2) years old, then three (3) original credit letters from a lending institution located in the country of origin must be obtained.  The letters must be translated into English.
o   Current International Credit Reports are acceptable as long as they demonstrate three (3) credit references that are at least two (2) years old.
·      A copy of the borrower’s passport and visa must be obtained to verify eligibility.
·      Must document 2 yr employment history (including retirement) in country of origin. Document must be translated into English.
·      Owner occupied 2nd and vacation home only

Borrower types

·      Primary Borrower.
o   The individual who earns the most income

·      Co-Borrower
o   Other than Primary Borrower whose credit history, income or assets are used for qualifying the loan

·      First-Time Homebuyers (FTHB
o   Borrowers are considered first-time homebuyers if they have never owned property or, who cannot provide a mortgage or rental history for the most recent 12 months.
o   Does not apply to borrowers referenced in Rent Free, Limited Rent Free and Extended Rent Free criteria.



Miscellaneous requirements:
·      Non-occupant co-borrowers are not permitted
·      The maximum number of rental properties allowed is 10 for any one borrower (Except Foreign Nationals that cannot have more than one property financed, excluding primary residence in home country)
·      SouthStar will purchase a maximum of 3 loans, without MI, with an aggregate loan amount of $1,000,000 from any one borrower (One (1) Owner Occupied; One (1) 2nd Home and One Non Owner Occupied)
o   Maximum is limited to two loans per borrower, not to exceed $500,000, if transactions require MI
·      Purchase transactions require the seller to be on title for a minimum of 12 months.  No exceptions will be allowed on this product.
·      Loans with an LTV > 80% require a monthly deposit of escrow funds for property taxes, hazard insurance, mortgage insurance, and flood insurance unless prohibited by applicable state law.
·      Loans with LTV < 80% that do not establish escrows will be subject to pricing adjustments.





Mortgage Insurance
            LTV                                        30 Year                        15 Year

·      80.01 – 85.00%                       12.00%                        6.00%
·      85.01 – 90.00%                       25.00%                        12.00%
·      90.01 – 95.00%                       30.00%                        25.00%


Product Options

·      30 Year and 15 Year Fixed, 6 Month Libor, 2/6 Libor, 3/6 Libor and 5/6 Libor
·      Interest Only option available on all EXCEPT 15 Year Fixed

PROPERTY

The minimum 1st mortgage loan amount is $50,000.  Value will be determined as the lesser of appraised value or purchase price. The minimum 2nd mortgage loan amount is $20,000. 





Eligible Properties:



·      Single Family attached and detached
·      2 family detached
·      3-4 family detached
·      Condos (see below)
·      Town homes
·      PUD
·      Modular Homes





Fannie Mae Warrantable condominiums


·      Low, Mid and High rise condominiums allowed.  Hi rise condominiums must be typical for the area.
·      Project must be 100% complete
·      70% of the units must be sold or under contract
·      60% of the units must be owner occupied or used as second homes
·      No more than one (1) entity can own more than 10% of the project
·      No more than 10% of the complex can be used for commercial purposes and must be typical for the area.
o   Condominium projects that contain fewer than ten units may be eligible on a case-by-case basis as long as the borrower does not own more than one unit in the complex.
·      Must have been turned over to the Condo Association
·      HOA must maintain a minimum of $1,000,000 in liability insurance.
·      The units within the project must have separate and individual gas and water meters.
·      At times a condominium development has commercial space (i.e., first floor restaurant, deli, hair salon, grocery store, etc.). If this is the case, there should be no more than 20% commercial space in the building.
·      All acceptable borrowers are eligible


Non-Warrantable Condominiums

·      1-4 stories
·      A total of thirty three percent (33%) or more of the total available units must have been sold and closed.  For projects subject to additional phasing that are more than thirty three percent (33%) complete, pre-sale requirements will be applied to individual phases.
·      A maximum of seventy percent (70%) of the total number of units may be non-owner occupied.
·      No single entity (individual, corporation, investor group, etc.) may own more than ten percent (10%) of the total units in the project.
o   Condominium projects that contain fewer than ten units may be eligible on a case-by-case basis as long as the borrower does not own more than one unit in the complex.
·      At times a condominium development has commercial space (i.e., first floor restaurant, deli, hair salon, grocery store, etc.). If this is the case, there should be no more than 20% commercial space in the building.
·      Max LTV on this program is 95% if providing one loan financing.
·      The maximum LTV when there is secondary financing is eighty percent (80%). Max CLTV is ninety five percent (95%). SouthStar will not provide secondary financing.
·      Cash out refinancing is not allowed.
·      All acceptable borrowers are eligible

Condo Hotel

 A condo hotel is a fee simple or leasehold real estate which may include one or all of the following: front desk or resident manager, maid service, food and telephone services, commercial space, short term occupancy.  It is operated as a commercial hotel although the units are individually owned.  All condo hotels, regardless of intended occupancy will be underwritten to investment property guidelines.

  • Commercial space is not to exceed twenty five percent (25%) of the total area (square footage).
·      No single entity (individual, corporation, investor group, etc.) may own more than ten percent (10%) of the total units in the project.
  • SouthStar Funding will not purchase more than ten percent (10%) of the units in one project or four (4) units from one borrower in the same project, whichever is less.
  • Minimum of twenty units, finished and established, and may not be subject to additional phasing.
  • Construction quality above average.
  • Area considered as a resort area
  • Sixty percent (60%) of the units must be sold and closed.
  • Income from rental of the property will not be used to qualify the borrower.
  • HOA must maintain a minimum of $1,000,000 liability insurance coverage.
  • Condominium project budget must reflect a minimum reserve of ten percent (10%) of total project budget.
  • The condo hotel must have been operating a minimum of two (2) years.
  • The appraiser must comment in the appraisal that condo hotels are common to the area, that resale-marketing time is generally not over six (6) months and that the market supports strong rental activity.
  • Units located in a high-rise require a statement from the appraiser that high rise condominiums are common to the area.
  • Minimum square footage of the unit is seven hundred (700) square feet.
·      All acceptable borrowers are eligible

Condominium Conversions

·      All units, common elements and facilities within the project must be fully completed.
·      At least seventy percent (70%) of the total units in the project must have been conveyed or under contract to be sold as owner occupied primary residences.
·      Primary residences or second home purchases only.
·      No single entity (individual, corporation, investor group, etc.) may own more than ten percent (10%) of the total units in the project.
·      The units must be owned as fee simple (lease hold is not acceptable).
·      Unit owners must have the sole ownership, interest in and rights to use all project facilities and common elements.
·      The project must be fully covered by all applicable insurance coverage that is generally required for condominium projects.
·      All rehab work involved in the conversion must be completed in a workmanlike manner.
·      All acceptable borrowers are eligible
Note: Condo Conversions that were converted within the past three years must meet the following:
o   License Engineers report indicating acceptable structural integrity of the building and the condition of the major systems, including: Heating, Cooling, Plumbing, Electrical, Elevator and Roof Systems.
o   SSF will not purchase units directly from the builder/developer, ONLY re-sales.
o   Minimum two (2) re-sales within the project
o   All phases and common areas must be completed

Site Condominiums

A site condominium is a project that consists only of detached one-unit (1) dwellings and does not include manufactured or mobile housing units
·      Owner Occupied primary residence only.
·      Appraisal must clearly indicate the property is a detached single-family home, despite condominium zoning. Can be on Single Family Detached appraisal form
·      Title insurance policy must includes an ALTA-4, condominium endorsement
·      All required hazard, liability and flood insurance in acceptable form must cover subject property
·       Will not require a condo rate adjustment
·       HOA is not required

Leasehold Estates
  • Leaseholds are acceptable in areas where they are common to the market, provided the Mortgage loan not only covers the property improvements but also the Mortgagor’s leasehold interest in the land. 
  • The leasehold estate and improvements must constitute real property, be subject to the mortgage loan, and be insured by the title policy.
  • The term of the leasehold must be equal to or greater than the maturity date of the Mortgage. 
  • The lease must be valid, in good standing, assignable or transferable and in full force and effect. 

Rural Property is defined as:
·      Located on more than 5 acres. (Maximum lot size 10 acres)
o   Full value is provided on properties up to 10 acres
·      2 comps are greater than 5 miles from subject property
·      Appraiser classifies property as rural
·      25% or less of area is developed
·      Underwriters discretion
·      Maximum land to value ratio is 40%
·      Non Owner Occupied rural properties are not allowed.
·      Subject to underwriter discretion

Occupancy

Primary Residence – A primary residence is a one (1) to four (4) family property that is physically occupied by the Borrower as his or her principal residence.  The following criteria define residency:
·      Borrower occupies the property as his or her principal residence; SouthStar reserves the right to classify a home as investor if sufficient reason is evident to indicate the borrower is not using or is unlikely to use the home as a primary residence.
·      Property is occupied by the Borrower for the major part of the year;
·      Property location is convenient to the Borrower’s principal place of employment;
·      Property address is on record for federal income tax reporting, voter registration, driver’s license, occupational licensing, etc.; and
·      Property possesses physical characteristics to accommodate the Borrower’s immediate family (physical characteristics are considered those typical to both the owner and the neighborhood).
Second Homes/ Vacation Homes may require an LTV/Loan Amount reduction (see matrix). 
·      A second/vacation home is one (1) unit property owned and occupied by the Borrower for his or her exclusive use and enjoyment. 
·      This property should be located at a sufficient distance or time of travel from the primary residence. Rural is acceptable.
·      The following criteria define a second/vacation home:
o   Property is suitable for year-round occupancy;
o   Property is for the Borrower’s exclusive use and enjoyment;
o   Property is not subject to any rental pools or agreements requiring the property to be rented; and a management company does not control the property.
·      Three day rescission does not apply to 2nd /Vacation homes.
·      Two (2) to four (4) family unit properties, manufactured and modular are not eligible as a second/vacation homes. 
·      Timesharing or rental agreement ownership is also not eligible under this definition. 



Investment Property (Non Owner Occupied) is not occupied by the borrower as a primary or secondary home and is owned for the purpose of generating positive net cash flow.

  • Actual rents must be established by copies of signed lease agreements.  Market rents must be established in the Operating Income statement (Form 216), or by using the net cash flow amount established in the Operating Income Statement.
  • Investment properties that do not generate positive cash flow will be deemed unacceptable.
  • Maximum LTV on 3-4 unit properties is 80%
  • Refinance of vacant Non Owner Occupied properties are not allowed
  • Maximum One (1) Non Owner Occupied per borrower

Unacceptable property types include the following:
  • Properties with less than 700 square feet for all property types unless otherwise noted.
  • Properties with more than 10 Acres
  • Properties Zoned Agricultural (A1)
  • Row Homes valued under $100,000.
  • Row Homes in Baltimore
  • Co-ops
  • Raw land
  • Commercial
  • Rural Investor properties
  • Multi-family (greater than 4 units)
  • Unique properties (i.e. geodesic domes, earth homes, etc.)
  • Working farms, ranches or orchards.
  • Manufactured/Mobile Homes
·      Any property currently listed or listed for sale in the past six (6) months on any refinance transaction.
·       Refinance of vacant Non Owner Occupied properties are not allowed
·      Log homes
·      Kiddy condos
·      Time shares
·      Any residential property zoned commercial
·      1st Lien Loan amounts below $50,000
Note: SouthStar has the right to turn down unacceptable properties relative to risk associated with collateral.

Geographic Restrictions- the following areas are ineligible.
·      Guam, Puerto Rico or the US Virgin Islands
·      Alaska
·      Primary Cash-Out in Texas (NO Interest Only Cash Out)

 Appraisal Requirements

   1.  Age of appraisal
  • Appraisal must be less than six months old at time of closing
  • Appraisals greater than six months old but less than 12 months old require a re-certification of value. This re-certification must be dated within 60 days of note date. 
  • A new appraisal is required if original appraisal date exceeds twelve (12) months.

   2.  Documentation
  • For all single-family properties and detached PUD units, use the Uniform Residential Appraisal Report (Fannie Mae Form 1004) and Statement Limiting Conditions and Appraiser’s Certification (Fannie Mae Form 004B/Freddie Mac Form 439)
    • For single-family investment properties, market rents must be determined using the Operating Income Statement 216.
  • For condominium units, use the Appraisal Report – Individual Condominium or PUD Unit (Fannie Mae Form 1073/Freddie Mac Form 465) with Statement of Limiting Conditions and Appraiser’s Certification (Fannie Mae Form 1004B/Freddie Mac Form 439)
  • The Small Residential Income Property Appraisal Report (Fannie Mae Form 1025) must be used for all appraisals of two (2) to four (4) unit properties with Statement of Limiting Conditions and Appraiser’s Certification (Fannie Mae Form 1004B/Freddie Mac Form 439).
  • Operating Income Statement (Fannie Mae 216) must be completed with respect to rental properties, including all two (2) to four (4) unit properties.
  • If the estimate of Value is defined as “subject to repairs, alterations or conditions”, or “subject to completion per plans and specifications,” the original appraiser must complete and submit the Satisfactory Completion Certification (Form 442) with a photo of the completed property.

   3.  The property should conform to all applicable zoning regulations and be the highest and best use of the land. 
·      Legal non-conforming uses may be acceptable if the property can be rebuilt for its present use if destroyed.  A letter from the county stating the property can be re-built “as-is” in event of loss will be required.

4.  In-law apartments and outbuildings are acceptable as long as they are a legal use of the property, are typical for the area, and are not being used for a commercial purpose. Generally, they should be given no value in the appraisal unless supported by a minimum of two comparable sales.

5.  No excessive economic or functional obsolescence is allowed.

6.  Maximum financing is generally not available for properties at the low or high end of the value range for the neighborhood or properties in neighborhoods with declining market values, an oversupply of housing and/or marketing times in excess of six months.

7.  Deferred maintenance is not allowed over 85% LTV, and is limited to 2.5% of the lesser of the sales price or appraised value and must be cosmetic in nature and not related to structural defects.  The property must be habitable and meet local and state building codes for occupancy.  Deferred maintenance above 2.5% will require the work to be completed along with a 442.  Escrowing for repairs is not allowed, including “winter escrows”.

8.  Maximum allowable lot size is 10 acres.  All properties must be supported with like comparables in regard to acreage. And full value can be given to all 10 acres

9.  Two full appraisals are required when the Loan Amount is $650,000 or greater.

10.  Site value should be no more than thirty percent (30%) of the appraised value.  If site value
exceeds 30%, the appraiser must comment on how this affects marketability.  Site value in excess of 30% must be typical for the area.

11.  Property must be, at minimum, in average condition.

12.    Properties containing space heaters must be common for the area.  Comparables must also have space heaters.  Appraiser must verify and comment that the space heater is permanently affixed and properly vented.

13. Mixed-use properties are primarily used as a residence but are also being used for a small
      commercial purpose.  We allow these properties when the following criteria are met:
·      The borrowers must be both the owner and operator of the business.
·      There are not hazardous materials used or stored at the subject property
·      Mixed-use properties are limited to single family, primary residence.
·      Value is supported by three (3) mixed-used comparable sales and must represent the “highest and best use” as residential property. There must be no significant structural changes to the home and the footprint of the home must be typical for the neighborhood.
·      The mixed use of the property should represent a legal, permissible use of the property under the local zoning requirements.
·      Commercial use must be retail (antique shop, office, etc.)  It may not be industrial or manufacturing.
·      Maximum LTV/CLTV is 80%. 
·       
14. If marketing time on appraisal exceeds 6 months, maximum LTV/CLTV is 90%.

Zoning
Industrial, commercial and agricultural zoning is unacceptable.
Private Roads
Private roads require a permanent easement for ingress and egress with provisions for road maintenance.

Review Appraisals

A review appraisal must be performed by SouthStar Funding under the following circumstances:
 
·                      All appraisals are subject to an internal desk review
·                      All NINA loans with CLTV > 80%
·                      All Non-Owner Occupied properties.
·                      All properties being acquired through a gift of equity.
·    Any loan that the underwriter feels a review is warranted AND agreed upon by the SSF    Credit Risk Manager.
·    Any Loan Amount > $400,000
·    The review appraiser is instructed to verify that the comparables used by the appraiser are the best comps available and that all information given in the appraisal is correct according to public records.  In the event inaccuracies are found, and they may materially affect the value presented, Correspondent’s appraiser will be given the opportunity to address or explain these inaccuracies, or to present further information to justify the value given. 
·    Final determination regarding value will be given in the sole discretion of SouthStar 

FIRST LIEN INTEREST-ONLY PROGRAM


The interest-only program is offered through SouthStar Funding’s non-conventional lending division.  The interest-only option is underwritten and available on all programs associated with SouthStar’s Easy Doc matrix and guidelines except as otherwise noted below. Please see matrix for credit score requirements, loan amounts and LTV/CLTV limits.

·      Available on all transactions; Purchases, Rate & Terms and Cash out Refinances.
·      Available on all EASY DOC eligible property types.
·      First time home-owners acceptable on owner occupied transactions only.
·      Up to 100% LTV (combo loans).
·      Minimum $50,000 loan amount; maximum combined loan amount of $1,000,000.
·      Maximum seller contribution is 6% of the purchase price for non-recurring closings costs only (Not prepaids).  3% if LTV/CLTV > 90% and 3% if Non Owner Occupied.
·      Interest-Only payment is calculated by multiplying Loan amount times Interest Rate divided by 12 (i.e., $150,000 X 8.5% divided by 12= $1062.50).
·      Any secondary financing will be fully amortized.
·      Payment Shock and DTI is qualified off of initial start rate.

PRODUCT OPTIONS


Interest-only is available on: 30 Year Fixed, 6 Month Libor, 2/6 Libor, 3/6 Libor & 5/6 Libor.

·      Fixed for two (2), three (3) or five (5) years, adjusting every 6 months thereafter, re-amortizing at end of the Tenth (10th) year for the remaining twenty (20) year term.
·      Interest-only payment for the first Ten (10) years.
·      Floor is initial start rate.
§  Except when qualifying borrowers on 6 month Libor, THE QUALIFYING RATE IS 2% above actual start rate. DTI, Payment Shock and residual income requirements are based off the qualifying rate.
·      6 Month Libor caps are 1% periodic and 12% lifetime
·      All other ARM Caps are 3/1/5. First (1st) period adjustment cannot exceed 3%, thereafter adjustments cannot exceed 1%, and over the lifetime of the loan adjustments cannot exceed 5%.
·      6 month LIBOR index.

Interest-only option is NOT available:
  • Texas Primary Residence Cash Outs

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