08/12/2021

All policy changes and updates are referenced below to the appropriate section of the CLG. These policy changes are effective 08/12/2021 unless otherwise noted.

To review the program guidelines changes made August 5, 2021, or earlier, please follow this link to the archived Correspondent Lending Guides.

Update Regarding the CBCMA Rate Stack and Discount Points

With recent updates to our rate sheet, CBCMA now offers the rate stack necessary, on many of our products, for correspondents to be able to charge bona fide discount points. Lenders that charge bona fide discount points will need to provide the following documentation to us as part of the purchase package to evidence that the discount points are bona fide.

Correspondent’s Rate Sheet (from the day the loan was locked)

This update will require the following changes to the following sections:

5.29 (HPML, High Cost, & QM Compliance): HPML transactions are allowed. Lenders must comply with all CFPB & TRID requirements. High Cost loans are not permitted. All first mortgages must adhere to QM/ATR compliance. Mortgage loans exceeding the 3% max points and fees test are not permitted unless cures are applied. Bona fide discount points must adhere to CFPB and any or all state regulations. Bona fide discount points do not count toward the 3% max points and fees test.

5.31 (Fees to CBCMA): CBC Mortgage Agency cannot control whether or not discount points that are charged are bona fide; bona fide discount points may only be offered by retail lenders. CBCMA does currently offer, on some of its products, the rate stack necessary to make it possible for a retail lender to charge bona fide discount points. This does not, however, guarantee that a discount point is bona fide. A discount point may only be considered bona fide if the retail lender offers a rate that does not cost the borrower any points to get. In other words, a discount point is only considered bona fide if a par rate or better is available to the borrower and the borrower chooses to pay discount points for a lower rate. Bona fide discount points do not count toward the 3% max points and fees rule.

On occasion, CBCMA may offer a rate stack that requires the borrower to pay a fee for each rate offered. The fees for these rates are not bona fide discount points, but are a cost to obtain the associated rate and will be included in the 3% max points and fees charged to the borrower.

Application of the Buckley Sandler Memo: It is entirely appropriate to use a seller credit to pay for origination points or discount points, whether bona fide or not. If the borrower or seller has signed an appropriate addendum to the note (for an example, follow this link and then select the “CBC Process and Documents” dropdown) applying the seller concession to pay points and fees, and the points and fees charged are itemized in the seller’s column of the CD, then these charges are not calculated in the 3% maximum points and fees calculation.

Also keep in mind that converting seller credits to seller-paid fees must be done prior to or at closing. It cannot be corrected after closing. As described in the Buckley Sandler memo, conversion consists of two parts: first, the addendum to the note that must be completed and signed by the buyer or seller; second, the placement of the fee in the seller’s column on the CD. (To access the Buckley Sandler memo, follow this link and select the “Originator Resources” dropdown.)

5.32 (Fees to Originator): CBCMA will allow a maximum origination fee of 1.5%. Additionally, the lender may charge for any CBCMA loan level pricing adjustments (LLPAs); charges for loan level pricing adjustments may also be seller-paid. Lenders will be required to refund borrowers for any origination fees (including non–bona fide discount points) exceeding 1.5% plus CBCMA LLPAs.

Reasonable lender underwriting, administrative, or program fees are not considered in the above calculation; however, they are considered in the QM 3% max points and fees test. Bona fide discount points do not count toward the 3% max points and fees test. At no time will CBC Mortgage Agency purchase a loan that exceeds the QM 3% points and fees test.

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% max points and fees test.

5.34.5 (Rate Sheet Compliance): CBC Mortgage Agency cannot control whether or not discount points that are charged are bona fide; bona fide discount points may only be offered by retail lenders. The terminology of “discount points” has been clarified with regards to discussions surrounding the price paid by correspondents for rates charged on our rate sheets. Please see the Correspondent Lending Guide, sections 5.31 (Fees to CBCMA) and 7.10 (Important Notice Regarding CBC Mortgage Agency Investor Delivery Fee and Clarification of Rate Sheets), for a complete explanation and correct compliance interpretation.

For loans where discount points are present, correspondents will be required to include the correspondent’s published rate sheet in the purchase package in order to allow CBCMA to determine bona fide discount points from discount points that must be counted toward the 3% max points and fees calculation (non–bona fide discount points). This rate sheet must be from the day the loan was locked.

7.7 (QM Points and Fees Calculation): CBCMA requires that all first mortgages meet the QM Points and Fees calculation, also called the 3% max points and fees rule.

When a borrower is charged discount points it is required that correspondents include their published rate sheet in the purchase package in order to allow CBCMA to determine bona fide discount points from discount points that must contribute toward the 3% max points and fees calculation (non–bona fide discount points). This rate sheet must be from the day the loan was locked. Following these guidelines will help to prevent purchase delays.

7.10 (Important Notice Regarding CBC Mortgage Agency Investor Delivery Fee and Clarification of Rate Sheets): The term “discount points” has crept into many discussions surrounding the price paid by correspondents for rates charged on our rate sheets due to rate adjustments. These costs to obtain a rate are not bona fide discount points; they are a reduction in YSP. CBCMA does currently offer, on some of its products, the rate stack necessary to make it possible for a retail lender, after applying its corporate margin, to charge bona fide discount points. This does not, however, guarantee that a discount point is bona fide. For example, when a correspondent adds a corporate margin, often the borrower is left with a rate that requires a fee to be paid to obtain that rate. If no par rate or better is available to the borrower (a rate attainable without a fee), that discount point cannot be considered bona fide. In short, if a corporate margin or any other factor does not allow the borrower to select a par rate or better, then any discount point charged is not bona fide. In such cases, if the resulting fee is labeled as a “discount point” it is not a bona fide discount point and must contribute toward the 3% maximum points and fees rule.

As an HFA, CBCMA is very concerned about total points and fees charged to a borrower and recommends that the maximum total compensation earned by the correspondent on any affordable housing product (like Chenoa Fund™) does not exceed 4%.

Other Updates

Section 6.2.1 (Specific Details on Manufactured Housing), the line “Single-wide manufactures homes” was removed from “Ineligible Features.” This will allow single-wide manufactured homes to be eligible for Chenoa Fund™ down payment assistance if they meet FHA guidelines and Chenoa Fund™ overlays.

Version 11.2.1 Update (8/13/21): The pricing hit of 1.5 for FHA loans with manufactured homes has been removed.

Version 11.2.2 Update (8/18/21): Section 5.10 (First-time Homebuyer) has been clarified. Chenoa Fund overlays do not ever require first-time homeownership, but Agency Guidelines might.

The Chenoa Fund™ program now provides down payment assistance for Fannie Mae™ conventional loans (Conventional 97 and HomeReady®️) with FICO scores as low as 620. There are no additional requirements for borrowers with a FICO score lower than 640 if they are getting down payment assistance for a Conventional 97 or HomeReady®️ loan.

(The following was implemented on 8/5/21.) Chenoa Fund™ was updated to offer new down payment assistance amounts for Fannie Mae™ Conventional 97% loans and HomeReady®️ loans. The DPA amount for both of these loans may now be 3% or 5% of the lower of the purchase price or the appraised value. 3.5% assistance for these loans is no longer offered. This change affected the following sections of the guidelines:

5.1 (Chenoa Fund™): The DPA amount is 3.5% or 5% of the lower of the purchase price or appraised value of the home, for DPA products paired with FHA first mortgages, or 3% or 5% of the lower of the purchase price or appraised value of the home, for DPA products paired with FNMA first mortgages. This amount is rounded up to the nearest whole dollar.
5.2 (Conventional Offerings): Chenoa Fund™ down payment assistance is provided in the form of a second mortgage for both the HomeReady®️ and the Conventional Standard 97% loans. (The HomeReady®️ first mortgage is a registered trademark of Fannie Mae™.) Conventional second mortgages may be 3% or 5% of the lower of the purchase price or appraised value, regardless of the actual minimum down payment required. Regardless of the down payment requirement, Chenoa Fund™ down payment assistance may apply toward the down payment, closing costs, or prepaid items, or any combination of the three.
5.5.1 (High Balance Loans): High balance loans are not acceptable for Chenoa Fund™ down payment assistance for conventional loans (regardless of DPA amount) or the DPA Edge Soft Second 5%.
5.6 (Brief Description of DPA Product Types): All Conventional Programs: … Offers 3% or 5% assistance based on the lower of the sales price or appraised value.
5.27 (Maximum LTV/CLTV and Subordinate Financing): DPA Financing may be either 3% or 5% of the lower of the purchase price or appraised value.
5.38.1 (Alaska and South Carolina): In Alaska and South Carolina the minimum second mortgage loan amount is $5,000. Therefore, for purchase prices below $166,666.67 with 3% assistance, $143,800 with 3.5% assistance, or $100,000 with 5% assistance, the DPA amount will be $5,000 in those states.
8.11.2 (Loans Cancelled After Closing): In the case of the 3% assistance second liens, once CBCMA has wired the 3% to reimburse the Correspondent for DPA funds advanced to the borrower on behalf of CBCMA, the Correspondent will be required to pay a loan non-delivery fee of 4%.

08/12/2021

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