Special Announcement- January 7th, 2000
To: VHDA Originating Agents
From: Janice Burgess, Single Family Loan Programs Manager
Date: January 7, 2000
Re: Acceptance of Loan Prospector and Desktop Underwriter Decisions
Effective immediately VHDA will accept the credit approval of FreddieMac's Loan Prospector (LP) and Fannie Mae's Desktop Underwriter (DU) automated underwriting systems.
Since VHDA has certain regulatory requirements which must also must be met, it is imperative that all Originating Agents thoroughly review this announcement and follow the guidelines provided.
Tax-exempt Bond Programs:
- 30 Year Fixed Rate (FHA, VA & Conventional)
- Step Rate
- FHA Plus
All Mortgage Revenue Bond Requirements as stated in Sections 2.1 and 2.2 of the VHDA Origination Guidemust be met. These requirements are also stated in the Loan Submission Cover Letter. VHDA will accept the loan determination of loans receiving an "Accept/Accept Plus" or "Approve/Eligible" from LP or DU. This approval will apply to the credit qualifying requirements only (i.e. credit, ratios, employment). Originating Agents are responsible for insuring that all other VHDA regulatory requirements are met.
Documentation: Alternative documentation as required by the LP or DU approval is eligible except for the Verification of Employment (VOE). The standard VOE and current pay stub are still required to document the income for maximum income eligibility purposes. Three years tax returns are also still required to document that the applicant meets the first time homebuyer requirement. Since these documents are required, the Originating Agent must thoroughly review to ensure compliance with the Mortgage Revenue Bond requirements as well any other information which may effect the data which has been input for the loan approval. Information such as losses from a business, non-reimbursed employee expenses and other expense which appear on the tax returns or other submitted documentation will require an adjustment to the initial data which was input in LP or DU. It is imperative that the data input in LP or DU match the documented information in the file. Originating Agents are also reminded that income used for maximum income eligibility purposes and that used for credit qualifying which is input in LP or DU may be different.
Accurate qualifying rates for Step are to be input (FHA lst year rate, VA and Conventional - 2nd year rate).
Property Requirements: Standard VHDA property requirements must be met and a complete interior and exterior report must be prepared. The appraisal must provide adequate documentation of any unfinished area. to ensure all mortgage revenue bond requirements related to maximum sales price and acquisition cost limits are addressed. Reduced /limited condo and PUD warranties as allowed by DU are acceptable.
VHDA Flexible Alternative:
LP and DU approvals will also be accepted for VHDA's Flexible Alternative. The loans are to be input as either a Flex 97 (DU) or an Alt 97( LP) loan program. The approval also applies to credit qualifying issues only (i.e. credit, ratios, employment).
The following specific program eligibility requirements must still be met:
- Maximum income
- Borrower U.S. citizen or permanent resident alien requirement
- Homeownership Education requirement (97% - lst time homebuyer)
The 1/2 (.50%) reduction in discount point is available only for credit score of 700 or above (determined by using the middle score of the borrower with the lowest score).
The underwriter will need to waive the requirement for mortgage insurance on the Flex/Alt loans (except for mobile homes) since no mortgage insurance is required.
Stated program property guidelines must be followed. Reduced appraisals will be allowed including Form 2075.
Procedures when using LP or DU approvals:
VHDA Approved Delegated Underwriters must review the loan for compliance with all VHDA regulatory requirements and verify that accurate information as supported by the provided documentation was input in the AUS system when obtaining the approval.
Loans not receiving an "Accept/Accept Plus or Approve/Eligible must meet all standard VHDA guidelines as well the insurers stated program guidelines. Loans receiving a "Refer" or "Refer with Caution" must be traditionally underwritten and meet all insurer and VHDA guidelines.
Delegated Approval Notice:
The approved VHDA Delegated Underwriter must complete the VHDA Delegated Approval Notice in accordance with standard procedures. The Delegated Underwriter is to indicated on the approval notice if LP or DU was utilized. This may be indicated next to the underwriters name on the Delegated Approval Notice.
The appropriate approval (LP Feedback Report or DU Findings Report) must be included. These are to be placed on top of the Residential Loan Application (1003) in the loan package submitted to VHDA. The VHDA Delegated Underwriter must sign this approval certifying as to the validity of the information submitted for the LP or DU recommendation. Originating Agents are expected to include the Feedback Report or Findings report for loans which received a "Refer" or "Refer with Caution" but were subsequently approved by the underwriter.
Questions related to these procedures may be forwarded to anyone in the VHDA underwriting department at 1-800-227-8432.