21-07-15 Announcement—July 15 2021 Program Guidelines Update

Effective 07/15/2021

All policy changes and updates are referenced below to the appropriate section of the CLG. These policy changes are effective 07/15/2021 unless otherwise noted.

To review the program guidelines changes made June 30, 2021, or earlier, please follow this link to the archived Correspondent Lending Guides.

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Announcements

CBC Mortgage Agency has made a major revision to Chenoa Fund guidelines for the DPA Edge products: these products will now support credit scores as low as 600 (Forgivable Second or Repayable Second)! This applies to both the 3.5% and 5% DPA options within this product class. Eagle-eyed readers may have noticed another announcement hidden in there: the DPA Edge Repayable Second product is now offering a 5% DPA option in addition to its existing 3.5% DPA option.

CBC Mortgage Agency allows its correspondents to calculate student debt per the guidelines in the HUD Mortgagee Letter 2021-13.

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Program Guidelines Changes

Chenoa Fund guidelines have been updated so that borrowers using the DPA Edge product (either forgivable or repayable, with either DPA amount) may now have a FICO score as low as 600. This is being treated as an extension of the 620–639 FICO bucket with most requirements remaining the same. This change affects the following sections of the CLG:

1. 5.3.1 (DPA Edge Products)
2. 5.13 (Minimum Credit Score)
3. 5.14 (Base DTI Requirements)
4. 5.15 (Payment Shock Requirements)
5. 5.16 (Alternative Qualification Requirements)
6. 5.17 (Present Housing Expense & Verification of Housing Payment)
7. 5.20 (Homeownership Education)
8. 6.2.1 (Specific Details on Manufactured Housing)

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In addition to the above update, borrowers with a 600–619 credit score will be required to take an HBE course through Money Management International (MMI). Borrowers with a 620–639 credit score are also required to take an HBE course, but may take any HUD-approved course. This change affects the following sections:

1. 5.16 (Alternative Qualification Requirements): HBE required (for borrowers with a FICO lower than 620, must be through Money Management International; see section 5.20 for details)
2. 5.20 (Homeownership education):
   All DPA Edge Products: Required for borrowers with credit scores from 600–639. This course must be taken prior to closing.
   Borrowers with a FICO score of 600–619 are required to take a counseling course through Money Management International. This course is accessible here and is paid for by CBCMA (for borrowers in this FICO band). Borrowers can take the course after their loan is registered in the CBCMA online lender portal.
   Borrowers with a FICO score of 620–639 may use any HUD-approved counseling course (you can access a list of HUD-approved courses here). CBCMA will pay the course fee for those borrowers who choose to take the above Money Management International course if they are in this FICO band.
   Only borrowers with scores less than 640 are required to take a homebuyer education course. Any borrower on your transaction with scores equal to or greater than 640 is not required to take a course.

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Chenoa Fund guidelines have been updated to reflect that a 5% DPA option is now available for the DPA Edge Repayable Second. Chenoa Fund requirements for the DPA Edge Repayable Second product remain identical between the two DPA amounts. This change affects the following sections:

1. 5.3 (FHA Offerings): Chenoa Fund down payment assistance for FHA loans provides down payment assistance equal to 3.5% or 5% of the sales price or appraised value, whichever is less, rounded up to the nearest whole dollar. This assistance may be applied towards the borrower’s minimum required investment, closing costs, or prepaid items, or any combination of the three.
2. 5.3.1 (DPA Edge Product): DPA Edge: Soft Second 3.5%: This second mortgage product offers 3.5% down payment assistance and is for borrowers whose income is less than 115% of the AMI for the subject property.
3. 5.4 (Product Comparisons): DPA Edge: Repayable Second—Applicable to Chenoa Fund’s Repayable 2nd mortgage, which offers 3.5% or 5% down payment assistance
4. 5.5.1 (High Balance Loans): DPA Edge Repayable Second (3.5% or 5% DPA)
5. 5.6 (Brief Description of DPA Product Types): DPA Edge: Repayable Second: … Offers 3.5% or 5% assistance based on the sales price or appraised value, whichever is lower.
6. 5.27 (Maximum LTV/CLTV and Subordinate Financing): All FHA: … DPA financing may be 3.5% or 5% of the lower of the purchase price or appraised value.
7. 8.11 (Loan Cancellation Policy): In the case of the 5% assistance second liens, CBCMA will wire 5% to reimburse the DPA funds and the Correspondent will be required to pay a loan non-delivery fee of 6%.

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5.13 (Minimum Credit Score): To prevent any possible confusion, this section had the following line added:

CBCMA follows industry standards (middle of three, lower of two) for determining which credit score to use for all Chenoa Fund credit score requirements.

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5.8 (AMI Calculation): The following line has been added to the end of the initial paragraph:

CBCMA will require a letter of explanation if more dependents than are listed on the 1003 are used to determine the AMI limit for the file.