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Conventional Underwriting Guideline Updates
Friday, January 14, 2011
Conventional Underwriting Guideline Updates
The Conventional guidelines have been updated effective for loans registered on or after January 14, 2011.
Pre-Foreclosure / Short Sale / Deed-in-Lieu of Foreclosure
The chart for recovery periods after Bankruptcies, Foreclosures, and Deed-in-Lieu have been modified for ease of navigation.
Also, guidelines for the recovery period after a pre-foreclosure, short sale, or deed-in-lieu have been updated. Previously, a pre-foreclosure, short sale or deed-in-lieu of foreclosure required a recovery period of 2 years. Loans scored through Desktop Underwriter (DU) will continue to permit a 2-year recovery period for non-MI loans. Loans scored through Loan Prospector (LP) or manually underwritten require a 4-year recovery period after a deed-in-lieu, pre-foreclosure, or short sale.
If extentuating circumstances can be documented, the recovery period is 2 years with a maximum 80% LTV.
Please note that when a credit history reflects a deed-in-lieu, preforeclosure, or short sale within the previous 7 years, the transaction is limited to a purchase of a primary residence or a no cash out refinance of any occupancy. Cash out transactions are not permitted until at least 7 years after the derogatory event.
Escrows
New guidance has been added to the guidelines regarding escrow accounts. Generally, an escrow account is set up to pay taxes or insurance associated with the loan. While the escrow of homeowners insurance is not mandated, the escrow of taxes, flood insurance, and mortgage insurance (if applicable) may be required.
This new section will provide guidance for the following scenarios:
• Exceptions for escrow waivers on investment properties
• Exceptions for escrow waivers on PHH-serviced HASP loans
Posted by Ted at 09:31:55