The summer of COVID-19
It has been a long hot summer for the mortgage industry and the COVID-19 requirements are keeping us sizzling.Radiating from all agencies and investors, there have been multiple updates offering continuing origination guidance issued by the Government-Sponsored Enterprises (GSEs). Since our last blog entitled ‘100 Days of COVID-19’, there have been clarifications, guidance and new selling requirements. Although not all are specifically tied to COVID-19 and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, many will need to be incorporated into current origination processes.
On the COVID-19 front, both government-sponsored enterprises (GSEs) continue to update their frequently asked questions (FAQs). The Fannie Mae FAQs and Freddie Mac FAQs were last revised on August 12, 2020. As the entire industry remains focused on the ongoing impact of the pandemic on homeowners seeking relief, there is an obvious lean towards forbearance roll off and other loss mitigation alternatives. From a quality control perspective, however, it remains important to stay focused on preventative measures that are best implemented during origination
Summer highlights from the more recent GSE updates:
Fannie Mae updated Lender Letter, LL-2020-03 on July 9, 2020 to again extend effective dates on COVID-19 origination flexibilities. This extension pertains to applications received through August 31, 2020, and includes reminders of the following temporary flexibilities:
Continued suspension of representation and warrant relief for employment validation through Desktop Underwriter.
The age of income and asset documentation remains capped at two months (reduced from four months).
Income documentation must evidence that the self-employed business is open and operating within 10 business days of the Note date.
When documenting down payment, closing costs, and/or reserves, policies for use of market-based assets continue.
Flexibilities for use of powers of attorney under COVID-19.
Verbal verification of employment flexibilities added to offset temporary DU validation changes to rep and warrant relief remain in effect.
The Fannie Mae Lender Letter for appraisal flexibilities, LL-2020-04, was also revised on July 9, 2020. This update reflects forbearance flexibility for HomeStyle® renovation loan draw inspection options, as long as the loan is current. Additionally, this Lender Letter extends the corresponding appraisal requirements under COVID-19 through August 31, 2020.
Updates to temporary COVID-19 requirements were also included in Bulletin 2020-27, dated July 9, 2020. This guidance includes the extension of temporary provisions from prior bulletins to mortgages with application dates through August 31, 2020.
The extension of temporary requirements under this Bulletin encompasses credit underwriting guidelines, appraisals, GreenCHOICE Mortgage® flexibilities, condominium project and power of attorney flexibility.
The update applicable to verification on self-employed borrowers calls for the confirmation that the business is open and operating. This requirement has been extended from within 10 business days prior to the Note date, to 20 business days. The extension of time allows a longer time frame
for sellers to confirm that a borrower’s business is open and operational immediately prior to settlement.
Post-funding quality control temporary flexibilities have been extended to mortgages designated for post-closing QC reviews through the August of 2020 selection.
Additional that are specific to COVID-19 were issued on August 5th, but may also warrant origination consideration to include:
Fannie Mae August 2020 Selling Guide offers clarification on guidelines for underwriting and appraising solar panel financing.
Freddie Mac provides general Selling updates as a part of Bulletin 2020-31 that touch on….
Verification and documentation of borrower monthly obligations, involving
Rental housing payments used as income for non-occupant borrowers,
Liabilities used to calculate monthly debt-to-income (DTI) ratio,
Loan proceeds secured by assets other than real property, for example 401(k), jewelry, etc.
Documentation age requirements for contingent liabilities, such as requirements for credit and capacity documentation, that are excluded from the DTI.
Property eligibility and appraisal requirements, to include building sketch requirement and the use of an appraisal desk review under certain conditions.
Updates to Document Custodian requirements.
Last but not least, back on July 1, under FHFA oversight, both Fannie Mae (LL-2020-10) and Freddie Mac (Bulletin 2020-26) will be implementing the redesigned Uniform Residential Loan Application, FNMA 1003 / FHLMC 65. The new URLA is available for use beginning January 1, 2021 and becomes mandatory on all applications received beginning March 1, 2021. The purpose for revision includes updating to meet the new Mortgage Industry Standards Maintenance Organization’s (MISMO) version 3.4 automated underwriting requirements (AUS) and to improve overall industry data collection, as well as format and layout improvement. The original implementation date was extended due to COVID-19 back in April; however, there is a limited production period (August 1, 2020 to December 31, 2020), whereby access can be obtained with discretionary approval from the individual GSEs.
Quality Mortgage Services (QMS), remains dedicated to providing the quality control and audit support that your team needs during these unprecedented times. Our commitment is to provide relevant experience, industry intellect and thought leadership that meets the needs of today’s mortgage banker. We pride ourselves on being uniquely positioned to provide each of our clients with professional, personalized QC services that are designed to maintain superior compliance standards, as well as meet niche brand and market presence, even amidst a pandemic. QMS is your answer to mortgage quality control and audit technology solutions, whether you need assistance in mitigating risk associated with COVID-19, meeting the challenges of ensuring compliance with remote personnel, or managing investor quality control, we are here for you. As a veteran-owned company and a dedicated member of the Mortgage Bankers Association (MBA), QMS is committed to both the industry and our valued customer base. Visit us today at www.qcmortgage.com and find out how our team can help you navigate unprecedented industry volatility.