Citi Correspondent Lending

BULLETIN

Citi Correspondent Lending

# 2019-04

April 12, 2019

Bulletin Contents

CREDIT POLICY UPDATES .............................................................................................................................. 2 Policy Overlay Changes: DU and LPA Transactions ................................................................................ 2 Primary Residence: Occupancy Requirements .......................................................................................... 2 Verifying the Existence of a Business: LPA Transactions ......................................................................... 2 Auto Allowance: LPA Transactions ............................................................................................................... 3 Restricted Stock & Restricted Stock Units: LPA Transactions ................................................................. 3

NOTICES............................................................................................................................................................... 3 Citi Underwriting Fee ....................................................................................................................................... 3 HAR Programs.................................................................................................................................................. 4

CLARIFICATIONS ............................................................................................................................................... 4 Power of Attorney............................................................................................................................................. 4 UCC Filing Requirements ............................................................................................................................... 4 Signed Business Tax Returns ........................................................................................................................ 5 Subordinate Financing .................................................................................................................................... 5 2-4 Unit Condo Projects .................................................................................................................................. 5 Deed Restricted Properties ............................................................................................................................ 5 Project Review Waivers: DU Transactions .................................................................................................. 5 FHA Transactions............................................................................................................................................. 6

REMINDERS......................................................................................................................................................... 6 Credit Report / Liabilities ................................................................................................................................. 6 Disaster Policy .................................................................................................................................................. 6

MISCELLANEOUS UPDATES........................................................................................................................... 7 MANUAL SECTIONS UPDATED ...................................................................................................................... 7

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CREDIT POLICY UPDATES

POLICY OVERLAY CHANGES: DU AND LPA TRANSACTIONS Effective Date: April 14, 2019; New Registrations

The following updates to policy addressing DU and LPA transactions are being made, resulting in removal of Citi overlays or less restrictive Citi policy:

DU Appraisal Waivers / LPA Automated Collateral Evaluation (ACE): DU: The 720 FICO requirement for purchase and cash-out refinance transactions has been removed. LPA: The 720 FICO requirement for purchase transactions has been removed.

DU/LPA 1 unit investment purchase and LPA 1 unit investment rate/term transactions: Maximum LTV/CLTV/HCLTV increased to 85%/85%/85% For LTVs 80.01-85%: o a minimum 660 FICO is required for DTIs 43% o a minimum 740 FICO is required for DTIs > 43%

Related updates to Citi's Policy Overlay document are in process.

Manual Section(s) Affected: 400, 400, 406, 407, 501.1

PRIMARY RESIDENCE: OCCUPANCY REQUIREMENTS Effective Date: April 14, 2019; New Registrations

Primary residence occupancy requirements addressing the needs of borrowers financing a home for a disabled adult child or an elderly parent have been further defined as shown below:

Borrower Type

Eligibility

Multiple Borrowers

Only one borrower needs to occupy and take title to the property, except as otherwise required for mortgages that have guarantors or co-signers.

Parents or legal guardian wanting to provide housing for their handicapped or disabled adult child

If the child is unable to work or does not have sufficient income to qualify for a mortgage on his or her own, the parent or legal guardian is considered the owner/occupant.

Children wanting to provide housing for parents

If the parent is unable to work or does not have sufficient income to qualify for a mortgage on his or her own, the child is considered the owner/occupant.

If the loan does not meet the above eligibility criteria, the property must be considered an investment property.

Manual Section(s) Affected: 809

VERIFYING THE EXISTENCE OF A BUSINESS: LPA TRANSACTIONS Effective Date: March 14, 2019; New Registrations and Existing Pipeline

Current policy stated verification of the existence of a business for self-employed borrowers must be completed 30 days prior to the loan closing date. Because LPA may permit a longer period of time (i.e., no more than 120 days prior to the Note Date), the LPA AUS note in policy has been updated to allow the LPA Feedback Certificate to be followed.

Manual Section(s) Affected: 805.2

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AUTO ALLOWANCE: LPA TRANSACTIONS Effective Date: April 14, 2019; New Registrations and Existing Pipeline

Per Freddie Mac 5303.3, the LPA AUS note in the Non-Employment Income/Auto Allowance topic has been updated to allow the LPA Feedback Certificate to be followed.

Manual Section(s) Affected: 805.4

RESTRICTED STOCK & RESTRICTED STOCK UNITS: LPA TRANSACTIONS Effective Date: March 6, 2019; New Registrations and Existing Pipeline

Pursuant to Freddie Mac Bulletin 2019-5, documentation requirements for using restricted stock (RS) and restricted stock units (RSU) as qualifying income have been streamlined for loans originated via LPA as follows (italicized text reflects updates):

Evidence the stock is publicly traded is required. Most recent vesting schedule(s) currently in effect detailing past and future vesting. YTD paystub(s), including payouts of RS or RSU, W-2 for the most recent 2 years and a 10-day prior to

closing verification; OR, all of the following: o Written VOE documenting YTD earnings including payout of RS or RSU as well as earnings for the most recent two calendar years, and a 10-day PCV. Employment and income verifications obtained through a third-party verification service provider are permitted, provided that the documentation clearly identifies and distinguishes the payouts of RS/RSU.

Evidence of receipt of previous year(s) payout(s) of RS/RSU (e.g., year-end paystub, employerprovided statement paired with a brokerage or bank statement showing transfer of shares or funds) that must, at a minimum, include the number of vested shares or its cash equivalent distributed to the Borrower (pre-tax).

Manual Section(s) Affected: 407, 414

NOTICES

CITI UNDERWRITING FEE

Citi Underwriting Fee policy was revised as shown below, effective 3/5/19: An Underwriting Fee may be charged for loans underwritten by Citi, regardless of Citi's loan decision. For Correspondents delivering into the Non Delegated Program: The Underwriting Fee will not be charged if the loan decision results in a decline or the loan terms of a counteroffer are not accepted by the borrower, provided the Correspondent's pullthrough remains at a minimum of 60%. o Pull-through will be measured on a quarterly basis. o Should a Correspondent fall below the 60% pull-through threshold, the Correspondent may be subject to Underwriting Fees being billed on fallout during that time period. The Correspondent will be subject to the Underwriting Fee for any loan underwritten by Citi that results in a closing package being submitted to Citi for purchase. For loans delivered as Delegated, if the Correspondent has requested review for Prior Approval (inhouse underwriting), an Underwriting Fee will be charged regardless of Citi's loan decision.

Manual Section(s) Affected: 305, 705

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HAR PROGRAMS

In bulletin 2018-14, Citi announced retirement of the Fannie Mae DU Refi Plus and Freddie Mac Relief RefiOpen Access Programs as of 1/1/19. Because Citi no longer has any of these loans in process, the 2 program sections (214-DU Refi Plus and 215-Freddie LPA Open Access) as well as references to these programs within the manual have been removed.

CLARIFICATIONS

POWER OF ATTORNEY

The following clarification regarding Power of Attorney requirements has been added to policy: A certified true copy of the POA form must be retained in the permanent loan file, unless it is a UPOA, in which case a copy (electronic, facsimile, or paper) is retained. In addition, in some states the POA must be recorded along with the Security Instrument and proof of the recordation must also be retained in the permanent loan file.

The Correspondent Lender must represent and warrant that loans delivered to Citi have been originated and closed in compliance with all applicable state laws and regulations.

Manual Section(s) Affected: 902.1

UCC FILING REQUIREMENTS

Because a lien is perfected by filing a properly prepared financing statement (UCC), the UCC1 must be filed in the proper jurisdiction(s). The following clarification has been added to Cooperatives/Uniform Commercial Code (UCC1) topic.

The UCC1 must be filed in the proper jurisdiction(s) as outlined in the table below. Failure to file as required can result in an insufficient UCC1 that may not adequately perfect Citi's lien on the unit, which, in turn, could affect the priority of Citi's lien.

Property State

UCC1 ? File UCC1 ? File on Local

with State

Land Record

Comments

Illinois

Yes

No

New Jersey Yes

If the cooperative was formed prior to May 7, 1988

(the effective date of the New Jersey Cooperative

Recording Act), the lien will not be perfected

Yes

unless the Proprietary Lease or any Assignment

of the Lease also is recorded on the local land

record.

New York

No

Yes

NOTE: Other UCC documents, such as the UCC1Ad (addendum), UCC1AP (additional party), UCC3 (amendment), and UCC1Cad (cooperative addendum; NY only) must also be filed in the proper jurisdiction. Failure to do so may have the same consequences as a failure to properly file the UCC1 itself.

Manual Section(s) Affected: 907

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SIGNED BUSINESS TAX RETURNS The Self-Employed Income/Working with Self-Employed income topic has been clarified to state both individual tax returns and, when applicable, business tax returns must be signed by the borrower. Manual Section(s) Affected: 805.2

SUBORDINATE FINANCING Requirements addressing subordinate financing have been clarified to state Small Business Administration (SBA) loans secured by the subject property must be treated as subordinate financing and included in the calculation of the CLTV and HCLTV ratios. The monthly payment of the subordinate lien must also be included in the borrower's DTI ratio calculation unless the borrower can meet requirements reflected in the Liabilities/Business Debt topic. Manual Section(s) Affected: 806.3

2-4 UNIT CONDO PROJECTS Fannie Mae and Freddie Mac policies around 2-4 unit condo project review requirements are now aligned. Therefore, references in policy that required project review on 2-4 unit condominium projects to meet agency guidelines have been removed. Manual Section(s) Affected: 606, 610

DEED RESTRICTED PROPERTIES Appraisal requirements addressing when the deed restriction terminates has been clarified as shown below (text in strikethrough font has been removed):

In cases where the Deed Restrictions terminate automatically upon foreclosure (or the expiration of any applicable redemption period), or upon recordation of a deed-in-lieu of foreclosure, the appraisal should reflect the "true market value" of the property without the resale restrictions. Manual Section(s) Affected: 808.3

PROJECT REVIEW WAIVERS: DU TRANSACTIONS The Project Approval topics in the fact sheets listed below have been updated to clarify that project approval is required regardless of whether an Appraisal Waiver is permitted, unless the project meets the Fannie Mae Waiver of Project Review guidelines. Manual Section(s) Affected: 233, 406, 413

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