Kentucky Fannie Mae Mortgage Guideline Changes for 2015

Kentucky Fannie Mae Mortgage Guideline Changes for 2015.

via Kentucky Fannie Mae Mortgage Guideline Changes for 2015.


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  1. As per FNMA Selling Guide Update SEL-2015-07, Platinum Mortgage has made the following changes to the Conventional guidelines effective immediately:

    Conversion of Principal Residence Requirements No Longer Apply

    This policy, imposed during the height of the financial crisis, was intended to be temporary in nature. The purpose of this policy has been to ensure that borrowers have adequate capacity and financial reserves to successfully manage multiple properties. It requires manual application by lenders for loan casefiles submitted to Desktop Underwriter® (DU®). Because there are other policies now in place that adequately address credit history, rental income, and financial reserves, Fannie Mae is eliminating the requirements specifically associated with the conversion of a principal residence to a second home or investment property.

    Lenders should follow the standard rental income and financial reserve requirements when the borrower converts his or her current principal residence to an investment property.

    Stocks, Bonds, and Mutual Funds

    Fannie Mae is updating the policies related to the use of vested stocks, bonds, and mutual funds (including retirement accounts) when they are used for down payment, closing costs, and reserves. Instead of requiring a standard reduction in value, the policies have been simplified as follows:

    One hundred percent (100%) of the value of the asset is allowed when determining available reserves.
    If the lender documents that the value of the asset is at least 20% more than the funds needed for the borrower’s down payment and closing costs, no documentation of liquidation is required. Otherwise, documentation of the borrower’s actual receipt of funds realized from the sale or liquidation must be obtained.
    NOTE: As a reminder, non-vested assets are not eligible for down payment, closing costs, or reserves.

    Unreimbursed Employee Business Expenses

    The following changes and clarifications have been made to the Selling Guide related to unreimbursed employee business expenses.

    For a borrower who is qualified using base pay, bonus, overtime, or commission income less than 25% of the borrower’s annual employment income:

    Unreimbursed employee business expenses are not required to be analyzed or deducted from the borrower’s qualifying income, or added to monthly liabilities. This applies regardless of whether unreimbursed employee business expenses are identified on tax returns (IRS Form 2106) or tax transcripts received from the IRS.
    Union dues and other voluntary deductions identified on the borrower’s paystub do not need to be deducted from the borrower’s income or treated as a liability.
    The Guide now clearly states that tax returns are not required to document these sources of income.
    For borrowers earning commission income that is 25% or more of annual employment income, unreimbursed employee business expenses must be deducted from gross commission income regardless of the length of time that the borrower has filed that expense with the IRS.

    The exception to this is if the expense is an actual automobile lease or loan payment. If borrowers report an automobile allowance as part of their monthly qualifying income, the lender must determine if the automobile expenses reported on IRS Form 2106 should be deducted from income or treated as a liability. The Selling Guide describes how the lender is to make this determination.

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