Non-QM Mortgage Program - Silvergate

Non-QM Mortgage Program

Purchase Eligibility Guidelines

Effective Date: June 22, 2020

Non-QM Mortgage Program Purchase Eligibility Guidelines

Table of Contents

1 General Purchase Eligibility....................................................................................................................... 1 1.1 Overview ............................................................................................................................................................... 1 1.2 Closed Loans Only.............................................................................................................................................. 1 1.3 Ability to Repay (ATR)..................................................................................................................................... 1 1.4 Manual Underwriting Requirement........................................................................................................... 1 1.5 QM Review............................................................................................................................................................ 2 1.6 Qualifying Rate (ARMs)................................................................................................................................... 2 1.7 Fannie Mae Guideline Reference................................................................................................................. 2 1.8 Zero Fraud Tolerance....................................................................................................................................... 2 1.9 Fair Lending Policy............................................................................................................................................ 3 1.10 Points and Fees................................................................................................................................................... 3 1.11 Higher-Priced Mortgage Loan (HPML) Eligibility ................................................................................ 3 1.12 HOEPA High-Cost (Section 32) Loans Not Eligible .............................................................................. 3 1.13 Ineligible Loan Features.................................................................................................................................. 3 1.14 Vesting.................................................................................................................................................................... 3 1.15 Inter Vivos Revocable Trust .......................................................................................................................... 3 1.16 Trust Agreement Requirements.................................................................................................................. 4 1.17 Power of Attorney ............................................................................................................................................. 4 1.18 Guideline Exceptions........................................................................................................................................ 4 1.19 Minimum/Maximum Loan Amounts ......................................................................................................... 5 1.20 Assumability ........................................................................................................................................................ 5 1.21 Ineligible States .................................................................................................................................................. 5 1.22 Non-Arm's-Length Transactions ................................................................................................................. 5 1.23 Ineligible Property Types ............................................................................................................................... 5 1.24 Loans to One Borrower ................................................................................................................................... 6

2 Non-Warrantable Condominiums ........................................................................................................... 6 3 Income Qualifying.......................................................................................................................................... 6

3.1 Adequate and Stable Income......................................................................................................................... 6 3.2 ATR Documentation ......................................................................................................................................... 7 3.3 Debt-to-Income Ratio Requirements......................................................................................................... 7 3.4 Residual Income Requirement ..................................................................................................................... 7 4 Income Documentation Option (Full-Doc) .......................................................................................... 7 4.1 Salaried Borrowers ........................................................................................................................................... 7 4.2 Self-Employed Borrowers .............................................................................................................................. 8 4.3 Fixed Income........................................................................................................................................................ 9 4.4 Capital Gains and Losses................................................................................................................................. 9 4.5 Farm Income...................................................................................................................................................... 10

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Non-QM Mortgage Program Purchase Eligibility Guidelines

4.6 Interest and Dividend Income .................................................................................................................... 10 4.7 Military Income ................................................................................................................................................ 10 4.8 Note Income ....................................................................................................................................................... 10 4.9 Rental Income ................................................................................................................................................... 10 4.10 Short-Term Rental Income ..........................................................................................................................11 4.11 Restricted Stock (RSUs) ................................................................................................................................11 4.12 Trust Income...................................................................................................................................................... 11 5 Alternate Income Documentation Option (Alt-Doc) ..................................................................... 12 5.1 Overview ............................................................................................................................................................. 12

5.1.1 Rents Received as Secondary Source of Income on Alt-Doc ........................................12 5.1.2 Short-Term Rentals ....................................................................................................................... 13 5.2 12- or 24-Month Bank Statement Program (Alt-Doc) ......................................................................13 5.3 12- or 24-Month 1099 Program (Alt-Doc) ............................................................................................15 5.4 Limited Program (Alt-Doc) .......................................................................................................................... 16 5.4.1 Asset Depletion Eligibility .......................................................................................................... 16 6 Asset Reserves ............................................................................................................................................. 17 6.1 Overview ............................................................................................................................................................. 17 6.2 Minimum Reserve Requirements .............................................................................................................17 6.3 Documentation of Assets ..............................................................................................................................17 6.4 Down Payment..................................................................................................................................................18 6.5 Business Funds .................................................................................................................................................18 6.6 Unacceptable Asset Sources ........................................................................................................................ 18 7 Borrowers...................................................................................................................................................... 19 7.1 General Definition............................................................................................................................................ 19 7.2 Customer Identification Program .............................................................................................................19 7.3 U.S. Citizens ........................................................................................................................................................ 19 7.4 Permanent Resident Aliens ......................................................................................................................... 19 7.5 Non-Permanent Resident Aliens (with U.S. credit) ...........................................................................19 7.6 Non-Occupant Co-Borrowers ..................................................................................................................... 20 7.7 First-Time Homebuyers................................................................................................................................20 8 Occupancy Types ........................................................................................................................................ 20 8.1 Primary Residence ..........................................................................................................................................20 8.2 Second Home ..................................................................................................................................................... 20 8.3 Investment Property ...................................................................................................................................... 21 9 Purchase Transactions.............................................................................................................................. 21 9.1 Purchases ............................................................................................................................................................ 21 9.2 Owner-Occupied Residency Requirement ............................................................................................21 9.3 For-Sale-By-Owner (FSBO)..........................................................................................................................21 9.4 Gift Funds ............................................................................................................................................................ 22

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Non-QM Mortgage Program Purchase Eligibility Guidelines

9.5 Sweat Equity ......................................................................................................................................................22 9.6 Seller Contributions........................................................................................................................................ 22 9.7 Property Flips....................................................................................................................................................22 9.8 Secondary Financing ...................................................................................................................................... 23 9.9 Departing Residences .................................................................................................................................... 23 10 Refinance Transactions ............................................................................................................................ 23 10.1 General Refinance Requirements..............................................................................................................23 10.2 Rate/Term Refinance.....................................................................................................................................23 10.3 Cash-Out Refinance......................................................................................................................................... 24 10.4 Cash-Out Limits ................................................................................................................................................ 24 10.5 Seasoning ............................................................................................................................................................ 24 10.6 Properties Listed for Sale ............................................................................................................................. 24 10.7 Benefit to the Borrower ................................................................................................................................ 25 10.8 Refinance in Texas...........................................................................................................................................25 10.9 Inherited Properties ....................................................................................................................................... 25 10.10 Buying Out a Co-Owner's Interest ............................................................................................................ 26 11 Credit Standards.......................................................................................................................................... 26 11.1 Mortgage/Rent..................................................................................................................................................26 11.2 Credit Report ..................................................................................................................................................... 26 11.3 Age of Credit Report ....................................................................................................................................... 26 11.4 Credit Scores...................................................................................................................................................... 26 11.5 Trade Lines......................................................................................................................................................... 27 11.6 Fraud Alerts ....................................................................................................................................................... 27 11.7 Inquiries...............................................................................................................................................................27 11.8 Disputed Credit Accounts............................................................................................................................. 27 11.9 Derogatory Credit ............................................................................................................................................ 27 11.10 Installment and Revolving Debts .............................................................................................................. 28 11.11 Timeshare Accounts ....................................................................................................................................... 28 11.12 Litigation .............................................................................................................................................................28 11.13 Consumer Credit Counseling....................................................................................................................... 28 11.14 Bankruptcy ......................................................................................................................................................... 28 11.15 Foreclosure/Deed-in-Lieu/Short Sale/Modification ........................................................................ 28 11.16 Judgment, Tax Lien, Collection, or Charge-Offs ...................................................................................28 11.17 Requirements for Letters of Explanation ..............................................................................................28

11.17.1 Profile Inconsistencies ................................................................................................................. 29 11.17.2 Social Security Number Discrepancies..................................................................................29 11.17.3 Questionable Credit Activity......................................................................................................29 11.17.4 Credit Inquiries ............................................................................................................................... 29 11.17.5 Adverse and Derogatory Credit ...............................................................................................29

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Non-QM Mortgage Program Purchase Eligibility Guidelines

11.18 Extenuating Circumstances ......................................................................................................................... 29 11.19 Liabilities.............................................................................................................................................................30

11.19.1 Installment Debt.............................................................................................................................30 11.19.2 Revolving Debt ................................................................................................................................30 11.19.3 Business Debt .................................................................................................................................. 30 11.19.4 Alimony and Child Support........................................................................................................31 11.19.5 Home Equity Line of Credit........................................................................................................31 11.19.6 Student Loans .................................................................................................................................. 31 12 Property Appraisal Requirements ....................................................................................................... 31 12.1 General Appraisal Responsibilities ..........................................................................................................31 12.2 Uniform Residential Appraisal Report (URAR)...................................................................................32 12.3 Number of Appraisals and Special Requirements..............................................................................32 12.4 Appraisal Report Content............................................................................................................................. 33 12.4.1 Subject Property Analysis...........................................................................................................34 12.4.2 Living Area ........................................................................................................................................ 34 12.4.3 Design .................................................................................................................................................34 12.4.4 Outbuildings.....................................................................................................................................34 12.4.5 Conversions or Additions ...........................................................................................................34 12.5 Property Condition.......................................................................................................................................... 34 12.5.1 Deferred Maintenance ................................................................................................................. 35 12.5.2 Debris, Graffiti, or Trash.............................................................................................................. 35 12.5.3 Infestation ......................................................................................................................................... 35 12.5.4 Roof Damage .................................................................................................................................... 35 12.5.5 Other Unacceptable Property Conditions ............................................................................35 12.6 Disaster Areas ................................................................................................................................................... 35 12.7 Comparable Sales............................................................................................................................................. 36 12.7.1 Proximity to the Subject Property........................................................................................... 36 12.7.2 Comparable Sales Inside and Outside of New Projects ..................................................37 12.7.3 Age of Comparable Sales ............................................................................................................. 37 12.7.4 Similarity to Subject Property .................................................................................................. 37 12.8 Personal Property............................................................................................................................................37 12.9 Appraiser Qualifications ............................................................................................................................... 37 12.10 Age of Appraisal................................................................................................................................................ 38 12.11 Repair Escrows ................................................................................................................................................. 38 13 Property Insurance .................................................................................................................................... 38 13.1 Minimum Hazard Insurance Coverage ...................................................................................................38 13.2 Calculating the Required Coverage Amount.........................................................................................38 13.3 Condominium and PUD Insurance ........................................................................................................... 39 13.4 Evidence of Hazard Insurance....................................................................................................................40

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