20-08 Program Guidelines Updates

Program Updates:

All policy changes and updates are linked to the appropriate section below.

Additionally, CBCMA has compiled all of its announcements related to COVID-19 into one convenient section in these guidelines. This section can be found immediately after this Recent Updates and Announcements section.

5.1 (Chenoa Fund): Chenoa Fund offers 3.5% down payment assistance based on the appraised value or sales price of the home, whichever is lower. Text was added to this section to make it clearer that this DPA amount will not be raised to match 3.5% of the higher of the two (new text bolded):

“Chenoa Fund down payment assistance is offered in the form of second mortgages. The DPA amount is always 3.5% of the purchase price or appraised value of the home, whichever is lower. (DPA amount not to be used to cover the difference between the appraised value and the sales price.) Following the close, our approved correspondent lenders, who offer Chenoa Fund products on CBCMA’s behalf, sell the first mortgage to CBCMA and receive a generous YSP/SRP. Correspondent lenders also get reimbursed for the second mortgage by CBCMA.”

5.16 (Alternative Qualification Requirements): This section has received several significant clarifications, revisions, and additions.

First, while the alternative qualification requirements remain the same, they have been reworded to help enhance clarity

Original text: Alternative qualification requirements for borrowers who exceed payment shock or DTI requirements, or both:

  • Option 1: maximum DTI 31% front-end AND EITHER has two (2) years employed with the current employer OR two (2) months PITI reserves
  • Option 2: meets VA Residual Income Tests AND EITHER has two (2) years employed with the current employer OR two (2) months PITI reserves

New Text: Alternative qualification requirements for borrowers who exceed payment shock or DTI requirements, or both:

  • Have two (2) years employed with the current employer OR two (2) months PITI reserves; AND
  • Have maximum DTI 31% front-end OR meet VA Residual Income Tests

Second, the base requirements for borrowers using the DPA Edge program have been revised and added to (new text and changed text bolded).

All DPA Edge Products (base requirements):

  • 620–639 (for borrowers with present housing payment)
    • Verification of twelve (12) months of current housing expense required; a traditional VOR is acceptable. If the borrower rents from a relative or individual (anyone other than an LLC or management company), then twelve (12) months of cancelled checks or bank statements are required to document payment history. See section 5.17 for more information
    • HBE required
    • Payment shock of 125% or less
    • DTI of 45% or less
    • If a borrower with present housing payment exceeds payment shock or DTI requirements, or both, refer to alternative qualification requirements; never to exceed 50% DTI
  • 620–639 (for borrowers without present housing payment)
    • See section 5.17 for more information regarding VOR requirements.
    • HBE required
    • Maximum DTI 31% front-end and 45% backend; never to exceed 45% backend DTI
    • Three (3) months PITI reserves
    • Minimum two (2) years with present employer
    • Meet VA Residual Income requirements
  • 640–659 (for all borrowers)
    • Verification of amount of current housing expense required; a payment history is not required
    • DTI of 50% or less
    • If a borrower exceeds this DTI, refer to alternative qualification requirements
  • 660+: DTI ratio per AUS approval

5.17 (Present Housing Expense & Verification of Housing Payment [Overlays]): This section has been revised and updated to match the changes in section 5.16 (changed or new text bolded):

All Programs: All applications should contain a “present housing payment” unless the borrower is not currently making a housing payment.

For any borrowers in the 620–639 FICO range making a present housing payment in the form of rent at the time of application, a twelve-month verification of housing payment is required to document rent paid. This is regardless of program. However, borrowers renting from relatives or individuals (i.e. not LLCs or management companies) must provide twelve (12) months of cancelled checks or bank statements rather than a VOR.

For borrowers in the 640–659 FICO range making a present housing payment in the form of rent at the time of application, only verification of the amount of the current housing expense is required. Acceptable forms of documentation include a copy of the rent/lease agreement, bank statements tracking payments for the amount of reported rent, a letter from the landlord, or a filled out VOR (if a VOR is provided, the rental history will be used in credit qualification).

For any borrowers not making a present housing payment, regardless of FICO range, a verification of housing payment will be required to be completed by the landlord or homeowner, which must document that no rent is required to be paid. An explanation for the rent-free arrangement should be noted in the comments section by the underwriter in the 92900-LT. This is in addition to the requirements in section 5.16.

5.31 (Fees to CBCMA): Text has been added to clarify what fees are allowed and what fees are not (added text bolded); this text matches guidance already given in 5.3 (FHA Offerings) and applies to both conventional and FHA loans.

“No lender fees allowed on secondary financing. The only fees chargeable to the borrower in conjunction with the secondary financing are prepaid interest, recording fees for the Deed of Trust, reasonable settlement fees, and a courier fee to return the signed documents to the Lender.

5.32 (Fees to Originator): In an effort to clarify our stance on discount points and other points that can be charged to the borrower, the following paragraph has been added to this section:

“It is recommended that discount points are not charged; we recommend that lenders treat loan-level pricing adjustments as points and name them as points. At no time will CBC Mortgage Agency purchase a loan that exceeds the QM 3% points and fees test.”

In addition, the final paragraph of this section has been altered for clarity (changed text bolded):

“On brokered transactions, non–bona fide discount points may be charged in excess of the 1.5% origination fee maximum. These loans still must adhere to the QM 3% points and fees test.”

5.34.4 (Flood Certificate): In July, a small announcement was made that we no longer require CoreLogic for all flood certificates. However, we do require that the flood certification must match the appraiser’s flood information. If there is a discrepancy between the two, CBCMA will pull a CoreLogic flood certificate and bill the correspondent $15 on the PA.

This month we’ve further clarified these guidelines: the flood certification must be for life of loan. The added text can be found below (and bolded):

“Any flood certification from a valid vendor is acceptable as long as the flood certification in the file matches the appraiser’s flood information; this must include a life of loan certification. If there is a discrepancy between the two, CBCMA will pull a CoreLogic flood certificate and bill the correspondent the $15 fee on the PA.”

5.34.14 (Additional Properties Owned): We’ve clarified previous guidelines to state specifically that we do not allow borrowers to own additional properties for our Rate Advantage program, nor for our down payment assistance for Fannie Mae’s HomeReady® program. This is an overlay. As the textual changes are small, they will not be included here, but check the section to read the exact wording.

5.36 (Mortgage Insurance Certificate): We’ve formally incorporated the 20-20 COVID-19 announcement that MICs are required prior to purchase. However, for correspondents with specific waivers, guidance on delivering the MICs within sixty (60) days of the note date is still provided. The modified text can be found below:

“Due to COVID-19, all MICs are required prior to purchase. This is currently a temporary measure, but may become permanent. If a waiver is granted, all mortgage insurance certificates may be delivered to CBC Mortgage agency within sixty (60) days of the note date. However, on manufactured homes, all MICs will be required prior to purchase, always.”

6.2.3 (Structural Engineering Report [Engineer’s Certification on Foundation Compliance Report]): We removed the word “new,” which suggested that only new structural engineering reports would be accepted. This is not the case. Follow HUD’s manual for guidance on structural engineering reports.

7.22.2 (Second Loan Documentation Requirements): In an effort to have this list of required loan documents be as thorough as possible, we’ve added the following documents to this list:

  • 2nd Lien Note to be Endorsed to CBC Mortgage Agency, or an Allonge that is wet signed (stamped signature OK if it is an original)
  • Any additional state-required disclosures

In addition, we recommend that loan documentation includes a Letter of Intent to Proceed.

7.25.1 (Adding Persons to Title and Sales Contracts): This is a new section added to specify that we allow persons to be added to title and sales contracts, even if they are not on the loan. The specific text of the section is included below:

“CBC Mortgage Agency allows persons to be added to the contract and title that are not on the loan, such as non-purchasing spouses, per Agency and state guidelines.”

8.5 (Use of Power of Attorney at Closing): The following text was added to the third bullet to clarify that borrowers and co-borrowers may be allowed to sign for each other via Power of Attorney (added text bolded):

  • The designated individual with Power of Attorney may not have a direct or indirect interest in the transaction (this exclusion does not apply to any of the borrowers on the transaction)

11.1 (Early Payment Default): The first paragraph of this section has been revised to clarify our policies on early payment defaults and delinquencies. The new paragraph is included below:

“An early payment default (for the purpose of the agreement between the correspondent and CBC Mortgage Agency) is defined as the first payment that becomes thirty (30) days or more delinquent, or any of the second through sixth payments that becomes sixty (60) days or more delinquent. A payment is considered delinquent if a payment is not received on or before the due date designated on the mortgage note (first or second).”

11.2.1 (Amortized and Repayable Second Mortgage): Text was added to clarify how refinances work when the second mortgage does not yet qualify for a subordination (new text bolded):

“CBC Mortgage Agency does not allow for subordinations in the thirty six months beginning with the first payment on the loan. To qualify under these circumstances, the borrowers must have made thirty-six (36) payments on both the primary and secondary loans, with no late payments (defined as more than thirty [30] days late). If a borrower would like to refinance their first mortgage prior to the thirty-sixth month, CBC Mortgage Agency will not subordinate, and thus the second mortgage must be paid in full. For payoff information, please contact servicing@chenoafund.org.”