Closing Loans & Actively Lending While Quarantined

Last Updated: 4-8-2020

Here are some common changes we are seeing across the board from many of the lenders that we work with. 

Things sometimes are taking longer and we are having to ask clients to help us obtain items for closing BUT lenders are lending and actively making changes as we all adjust to these changing times.

VA IRRRLS AND FHA STREAMLINES

All VA-IRRRLs and FHA-Streamlines must be underwritten as credit qualifying and will require a credit report dated within 30 days , income documentation, 2 paystubs, 2 years W2’s, and employment verification. A verbal VOE is also required

INCOME/EMPLOYMENT VERIFICATION

Ensuring borrowers have the ability to repay the loan is paramount. While the VA, FHA, Fannie Mae and Freddie Mac have offered some flexibility as it relates to alternative documentation to verify employment, Lenders will continue to exercise prudent practices to verify continued employment prior to closing.

This will include a verbal verification, as always, but may also require a reverification of the borrower’s income, employment, and/or hours, immediately prior to closing or funding, as we deem necessary.

The Wage Earning Borrower:

  • The paystubs used to document income cannot be more than 30 days old at the time of closing.
  • If the borrower is paid monthly, in which case the most recently issued paystub will be required

For rental income:

  • Some Lenders will not allow rental income to offset the mortgage payment.
  • The borrower must also qualify with the full PITI for the subject and REO properties owned.
  • Unless the borrower can provide evidence of at least six months of reserves, per property 

For self-employed borrowers:

  • Evidence that the business is still active no more than 15 days prior to closing will be required.
  • This may include research by Lenders to confirm the business location is still active/open (if applicable).

Lenders may exercise additional due diligence as seen fit, which may include, but is not limited to additional scrutiny or validation of employment in areas known to be impacted by shelter-in-place orders or employment industries known to be more broadly impacted by.

TAX TRANSCRIPTS

The IRS is unable to process 4506T forms at this time, thus preventing Lenders from being able to order them on your borrower's behalf. For loans that require transcripts, Lenders are allowing borrowers to obtain a copy of their own transcripts by going to the IRS website directly.

Click Here for More Information on how to Manually Request the 4506T

APPRAISAL GUIDANCE

In response to the COVID-19 pandemic, Fannie Mae and Freddie Mac have issued joint guidance on a number of topics to help provide flexibility to continue to lend responsibly.

APPRAISAL ALTERNATIVES – FOR CONVENTIONAL LOANS ONLY

Some Lenders will allow the temporary alternative methods of appraisal

  • Desktop Appraisal
  • Exterior-Only (Form 2055)

In addition to the expanded appraisal offerings, Fannie Mae and Freddie Mac both intend to expand the number of loans that will receive an appraisal waiver.

  • Freddie Mac has confirmed that new loans submitted or resubmitted to Automated Underwriting on/after March 29, 2020 will have an increased opportunity to receive an appraisal waiver on certain refinances.
  • The same is expected from Fannie Mae, but details on timing are limited.

If an appraisal waiver is not offered, the following options are available:

To determine the owner of the loan:

Click Here For Fannie Mae  OR Click Here For Freddie Mac

TITLE EXCEPTIONS

With many county recording offices being closed due to COVID-19, mortgage recording may become more challenging. As a reminder, the 2006 ALTA Loan Policy title commitments, or the local equivalents, contain a “Covered Risk #14” that covers matters between closing and recording.

Any exceptions to this coverage in Schedule B will deem the loan ineligible to close. In addition, Some Lenders will not accept any responsibility for future concerns related to recording offices being closed or other liability related to COVID-19.

Closings & Signings:

Most title offices are closed to walk-ins or foot traffic.  They are taking appointments only BUT highly recommending for the safety of all parties that clients use a notary to lessen exposure. 

If you are signing at a title office they are not allowing anyone BUT the borrowers at signings and they are asking borrowers to bring their own blue ink pens and not to do a signing if they’re feeling sick.

RENTAL INCOME

Borrowers cannot qualify with rental income (no gross rents), unless they are able to document 6 months of reserves for each rental property using rental income.

Similarly, if business income is derived from rents, the business (or borrower) must have 6 months reserves for each property to use rental income in a business.

RATES

Interest rates are on a roller coaster ride. As news of the COVID-19 pandemic is announced rates may go up, down, and all around many times in one day. 

Contact Us

We are here for you!

We are currently advising clients that are looking to buy or refinance to Apply ASAP and provide all documentation. 

We are watching rates and if those rates get into a range that is beneficial to our borrowers, we will lock and submit their loan. 

We’re constantly on the lookout for opportunities to help you save money on your mortgage.

If you have any questions or concerns, please don’t hesitate to contact us.


* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.