Selling Guide - Fannie Mae

Selling Guide

Fannie Mae Single Family

Selling Guide: Fannie Mae Single Family

Published July 25, 2017

07/25/2017

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07/25/2017

Fannie Mae Copyright Notice

(1) ? 2017 Fannie Mae. No part of this publication may be reproduced in any form or by any means without Fannie Mae's prior written permission, except as may be provided herein or unless otherwise permitted by law. Limited permission to reproduce this publication in print in whole or in part and limited permission to distribute electronically parts of this publication are granted to Fannie Mae-approved lenders, servicers, and other mortgage finance professionals, strictly for their own use in originating mortgages, selling mortgages to Fannie Mae, or servicing mortgages for Fannie Mae. Fannie Mae may revoke these limited permissions by written notice to any or all Fannie Mae-approved users.

A full version of this publication is available on Fannie Mae's website. If there should ever be a difference between this publication as it appears on the AllRegs? website and the version published by Fannie Mae, the difference is an error. In such event, the Fannie Mae version of this publication shall be deemed the correct authoritative version. Material discrepancies between the two versions, identified by Fannie Mae or otherwise brought to our attention, may be addressed by Announcement.

(2) Disclaimer: This publication is posted on the AllRegs website of Mortgage Resource Center, Inc., ("MRC") under license from and with the express permission of Fannie Mae. MRC is the exclusive third-party electronic publisher of this publication. Fannie Mae makes no representation or warranty regarding any of the features, functionality, or other contents of the AllRegs website.

You acknowledge and agree (individually and on behalf of the entity for which you are accessing this publication,"You") that You may not make any claim against Fannie Mae or MRC for any errors, and: (i) neither Fannie Mae nor MRC shall be liable to You for any losses or damages whatsoever resulting directly or indirectly from any errors, and (ii) MRC expressly disclaims any warranty as to the results to be obtained by You from use of the AllRegs website, and MRC shall not be liable to You for any damages arising directly or indirectly out of the use of the AllRegs website by You.

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Table of Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xviii Part A, Doing Business with Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Subpart A1, Approval Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Chapter A1-1, Application and Approval of Seller/Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 A1-1-01, Application and Approval of Seller/Servicer (01/31/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Subpart A2, Lender Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Chapter A2-1, Contractual Obligations for Fannie Mae?Approved Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 A2-1-01, Contractual Obligations for Lenders (04/09/2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 A2-1-02, Nature of Mortgage Transaction (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 A2-1-03, Indemnification for Losses (08/30/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Chapter A2-2, Contractual Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 A2-2-01, Contractual Representations and Warranties (10/24/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Section A2-2.1, Additional Selling Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 A2-2.1-01, Selling Representations and Warranties Overview (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . .18 A2-2.1-02, Delivery Information and Delivery-Option Specific Representations and Warranties (08/30/2016) . 18 A2-2.1-03, Document Warranties (08/20/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 A2-2.1-04, Limited Waiver and Enforcement Relief of Representations and Warranties for Mortgages Submitted to DU (03/28/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 A2-2.1-05, Invalidation of Limited Waiver of Representations and Warranties (01/27/2015) . . . . . . . . . . . . .27 A2-2.1-06, Representations and Warranties on Property Value(03/28/2017) . . . . . . . . . . . . . . . . . . . . . . . .28 A2-2.1-07, Life-of-Loan Representations and Warranties (11/03/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Chapter A2-3, Lender Breach of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 Section A2-3.1, Lender Breach of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 A2-3.1-01, Lender Breach of Contract (02/23/2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 A2-3.1-02, Sanctions, Suspensions, and Terminations (02/23/2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Section A2-3.2, Loan Repurchases and Make Whole Payments Requested by Fannie Mae . . . . . . . . . . . . . . .45 A2-3.2-01, Loan Repurchases and Make Whole Payments Requested by Fannie Mae (08/30/2016) . . . . .45 A2-3.2-02, Enforcement Relief for Breaches of Certain Representations and Warranties Related to Underwriting and Eligibility (12/06/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 A2-3.2-03, Remedies Framework (08/30/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Section A2-3.3, Compensatory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 A2-3.3-01, Compensatory Fees (07/30/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 Chapter A2-4, Master Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 A2-4-01, Master Agreement Overview (12/06/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 A2-4-02, Terms of a Master Agreement (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 A2-4-03, Variances and Special Provisions (12/06/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 A2-4-04, Breaches of a Master Agreement (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 Chapter A2-5, Mortgage Files and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73 Section A2-5.1, Establishment and Maintenance of Mortgage Files and Records . . . . . . . . . . . . . . . . . . . . . . .74 A2-5.1-01, Overview of Mortgage Files and Records (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74

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A2-5.1-02, Individual Mortgage Loan Files (05/30/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 A2-5.1-03, Electronic Records, Signature, and Transactions (05/30/2017) . . . . . . . . . . . . . . . . . . . . . . . . . .77 A2-5.1-04, Lender's or Document Custodian's Electronic Transactions With Third Parties (07/26/2011) . . .80 Section A2-5.2, Ownership, Retention, and Examination of Mortgage Files and Records . . . . . . . . . . . . . . . . .83 A2-5.2-01, Ownership of Mortgage Loan Files and Records (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . .83 A2-5.2-02, Access to Records (04/09/2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84 A2-5.2-03, Retention and Storage of Mortgage File Records (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . . . . .85 Chapter A2-6, Fannie Mae Trade Name and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88 A2-6-01, Fannie Mae Trade Name and Trademarks (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88 Subpart A3, Getting Started With Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91 Chapter A3-1, Fannie Mae's Technology Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92 A3-1-01, Fannie Mae's Technology Products (04/01/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92 Chapter A3-2, Compliance With Requirements and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94 A3-2-01, Compliance With Laws (05/30/2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94 A3-2-02, Responsible Lending Practices (12/16/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 Chapter A3-3, Third-Party Lending Functions and Servicing Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104 A3-3-01, Outsourcing of Mortgage Processing and Third-Party Originations (12/15/2015). . . . . . . . . . . . . . . .104 A3-3-02, Concurrent Servicing Transfers (04/25/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107 A3-3-03, Other Servicing Arrangements (12/15/2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111 A3-3-04, Document Custodians (07/25/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113 A3-3-05, Custody of Mortgage Documents (07/25/2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117 A3-3-06, Document Custodian Electronic Transactions (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119 Chapter A3-4, Lending Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120 A3-4-01, Confidentiality of Information (01/31/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120 A3-4-02, Data Quality and Integrity (10/24/2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124 A3-4-03, Preventing, Detecting, and Reporting Mortgage Fraud (02/23/2016) . . . . . . . . . . . . . . . . . . . . . . . . .127 Chapter A3-5, Fidelity Bond and Errors and Omissions Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132 A3-5-01, Fidelity Bond and Errors and Omissions Coverage Provisions (07/25/2017) . . . . . . . . . . . . . . . . . . .132 A3-5-02, Fidelity Bond Policy Requirements (07/25/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134 A3-5-03, Errors and Omissions Policy Requirements (07/25/2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .135 A3-5-04, Reporting Fidelity Bond and Errors and Omissions Events (07/25/2017) . . . . . . . . . . . . . . . . . . . . . .137 Subpart A4, Maintaining Seller/Servicer Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .139 Chapter A4-1, Maintaining Seller/Servicer Eligibility: Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140 A4-1-01, Maintaining Seller/Servicer Eligibility (01/31/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140 Chapter A4-2, Submission of Operational and Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .146 A4-2-01, DELETED TOPIC: Net Worth, Liquidity, and Credit Rating Requirements (01/31/2017) . . . . . . . . . .146 A4-2-02, Financial Statements and Reports (01/31/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147 A4-2-03, Lender Record Information (Form 582) (01/31/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .149 Chapter A4-3, Changes in the Seller/Servicer's Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .151 A4-3-01, Report of Changes in the Seller/Servicer's Organization (01/31/2017). . . . . . . . . . . . . . . . . . . . . . . .151

Part B, Origination Through Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

Subpart B1, Loan Application Package. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .155 Chapter B1-1, Application Package Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .156

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B1-1-01, Contents of the Application Package (12/16/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .156 B1-1-02, Blanket Authorization Form (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159 B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns (10/24/2016) . . . . . . . . . . . . .159 Subpart B2, Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .163 Chapter B2-1, Mortgage Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .164 B2-1-01, Occupancy Types (11/03/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .164 Section B2-1.1, LTV, CLTV, HCLTV, and Subordinate Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167

B2-1.1-01, Loan-to-Value (LTV) Ratios (03/29/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167 B2-1.1-02, Combined Loan-to-Value (CLTV) Ratios (02/23/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .169 B2-1.1-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios (02/23/2016). . . . . . . . . . . . . . . . . . . .171 B2-1.1-04, Subordinate Financing (06/30/2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .172 Section B2-1.2, Loan Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .177 B2-1.2-01, Purchase Transactions (10/24/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .177 B2-1.2-02, Limited Cash-Out Refinance Transactions (10/24/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .180 B2-1.2-03, Cash-Out Refinance Transactions (07/25/2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .186 B2-1.2-04, Prohibited Refinancing Practices (11/13/2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .191 B2-1.2-05, Payoff of Installment Land Contract Requirements (11/13/2012) . . . . . . . . . . . . . . . . . . . . . . . .193 Section B2-1.3, Loan Amortization Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .195 B2-1.3-01, Fixed-Rate Mortgages (08/20/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .195 B2-1.3-02, Adjustable-Rate Mortgages (ARMs) (07/25/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .196 B2-1.3-03, Convertible ARMs (02/23/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .206 B2-1.3-04, Refinanced Balloon Mortgages (12/15/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210 B2-1.3-05, Temporary Interest Rate Buydowns (07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .213 Section B2-1.4, Other Loan Attributes and Related Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .219 B2-1.4-01, Mortgage Loan Limits (03/31/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .219 B2-1.4-02, Mortgage Loan Eligibility (06/28/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .220 B2-1.4-03, Legal Requirements (08/20/2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .230 B2-1.4-04, Escrow Accounts (06/30/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .232 B2-1.4-05, Principal Curtailments (06/30/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .233 Chapter B2-2, Borrower Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .236 B2-2-01, General Borrower Eligibility Requirements (07/28/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .236 B2-2-02, Non?U.S. Citizen Borrower Eligibility Requirements (07/28/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . .238 B2-2-03, Multiple Financed Properties for the Same Borrower (03/29/2016) . . . . . . . . . . . . . . . . . . . . . . . . . .239 B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction (07/25/2017). . . .243 B2-2-05, Inter Vivos Revocable Trusts (01/17/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .245 B2-2-06, Homeownership Education and Housing Counseling (02/28/2017) . . . . . . . . . . . . . . . . . . . . . . . . . .248 Chapter B2-3, Property Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .253 B2-3-01, General Property Eligibility (04/15/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .253 B2-3-02, Special Property Eligibility and Underwriting Considerations: Factory-Built Housing (04/15/2014) . .256 B2-3-03, Special Property Eligibility and Underwriting Considerations: Leasehold Estates (03/31/2015) . . . . .259 B2-3-04, Special Property Eligibility Considerations (02/23/2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .263 B2-3-05, Properties Affected by a Disaster (04/15/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .266 Subpart B3, Underwriting Borrowers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .268 Chapter B3-1, Manual Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .269

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B3-1-01, Comprehensive Risk Assessment (08/20/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .269 Chapter B3-2, Desktop Underwriter (DU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .272

B3-2-01, General Information on DU (05/31/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .272 B3-2-02, DU Validation Service (03/28/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .277 B3-2-03, Risk Factors Evaluated by DU (08/30/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .283 B3-2-04, DU Documentation Requirements (03/31/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .288 B3-2-05, Approve/Eligible Recommendations (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .290 B3-2-06, Approve/Ineligible Recommendations (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .291 B3-2-07, Refer with Caution (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .292 B3-2-08, Out of Scope Recommendations (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .293 B3-2-09, Erroneous Credit Report Data (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .294 B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report (07/25/2017). . . . . . . . . . . . .295 B3-2-11, DU Underwriting Findings Report (10/24/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .299 Chapter B3-3, Income Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .301 Section B3-3.1, Employment and Other Sources of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .302

B3-3.1-01, General Income Information (7/25/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .302 B3-3.1-02, Standards for Employment Documentation (10/24/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .307 B3-3.1-03, Base Pay (Salary or Hourly), Bonus, and Overtime Income (05/15/2012) . . . . . . . . . . . . . . . . .310 B3-3.1-04, Commission Income (06/30/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .312 B3-3.1-05, Secondary Employment Income (Second Job and Multiple Jobs) and Seasonal Income (05/27/ 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .314 B3-3.1-06, Requirements and Uses of IRS Request for Transcript of Tax Return Form 4506-T (02/28/2017) . 316 B3-3.1-07, Verbal Verification of Employment (12/06/2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .319 B3-3.1-08, Rental Income (02/28/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .322 B3-3.1-09, Other Sources of Income (07/25/2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .328 Section B3-3.2, Self-Employment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .348 B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower (10/24/2016) . . . . . . .348 B3-3.2-02, Business Structures (12/16/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .352 B3-3.2-03, IRS Forms Quick Reference (09/30/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .356 Subsection B3-3.2, Documentation Requirements for an Individual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .358 Subsection B3-3.2, Documentation Requirements for a Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .370 Section B3-3.3, DU Requirements for Income Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .377 B3-3.3-01, Income and Employment Documentation for DU (10/24/2016) . . . . . . . . . . . . . . . . . . . . . . . . .377 B3-3.3-02, Income From Rental Property in DU (09/29/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .382 Chapter B3-4, Asset Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .386 Section B3-4.1, General Asset Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .387 B3-4.1-01, Minimum Reserve Requirements (03/29/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .387 B3-4.1-02, Interested Party Contributions (IPCs) (06/28/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .392 B3-4.1-03, Types of Interested Party Contributions (IPCs) (03/29/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . .395 Section B3-4.2, Verification of Depository Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .399 B3-4.2-01, Verification of Deposits and Assets (04/25/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .399 B3-4.2-02, Depository Accounts (12/06/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .401 B3-4.2-03, Individual Development Accounts (12/01/2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .404

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B3-4.2-04, Pooled Savings (Community Savings Funds) (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . .407 B3-4.2-05, Verification of Assets for Non-U.S. Citizen Borrowers (04/01/2009). . . . . . . . . . . . . . . . . . . . . .407 Section B3-4.3, Verification of Non-Depository Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .409 B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds (06/30/2015). . . . . . . . . . . . . . . . . . . . . . . . .409 B3-4.3-02, Trust Accounts (04/01/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .410 B3-4.3-03, Retirement Accounts (06/30/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .411 B3-4.3-04, Personal Gifts (09/29/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .411 B3-4.3-05, Gifts of Equity (11/13/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .414 B3-4.3-06, Donations From Entities (03/29/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .415 B3-4.3-07, Disaster Relief Grants or Loans (04/01/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .418 B3-4.3-08, Employer Assistance (09/29/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .418 B3-4.3-09, Earnest Money Deposit (08/21/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .420 B3-4.3-10, Anticipated Sales Proceeds (02/23/2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .421 B3-4.3-11, Trade Equity (12/01/2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .423 B3-4.3-12, Rent Credit for Option to Purchase (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .425 B3-4.3-13, Sweat Equity (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .425 B3-4.3-14, Bridge/Swing Loans (04/01/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .426 B3-4.3-15, Borrowed Funds Secured by an Asset (10/30/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .427 B3-4.3-16, Credit Card Financing (10/30/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .428 B3-4.3-17, Personal Unsecured Loans (09/20/2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .429 B3-4.3-18, Sale of Personal Assets (04/01/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .430 B3-4.3-19, Cash Value of Life Insurance (05/27/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .430 B3-4.3-20, Anticipated Savings and Cash-on-Hand (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .431 Section B3-4.4, DU Requirements for Asset Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .433 B3-4.4-01, Asset Verification (06/24/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .433 B3-4.4-02, Documentation Requirements (12/06/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .435 Chapter B3-5, Credit Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .440 Section B3-5.1, Credit Scores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .441 B3-5.1-01, General Requirements for Credit Scores (08/30/2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .441 B3-5.1-02, Determining the Representative Credit Score for a Mortgage Loan (08/30/2016) . . . . . . . . . . .444 Section B3-5.2, Credit Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .446 B3-5.2-01, Requirements for Credit Reports (12/06/2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .446 B3-5.2-02, Types of Credit Reports (08/30/2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .450 B3-5.2-03, Accuracy of Credit Information in a Credit Report (07/25/2017) . . . . . . . . . . . . . . . . . . . . . . . . .452 Section B3-5.3, Traditional Credit History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .454 B3-5.3-01, Number and Age of Accounts (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .454 B3-5.3-02, Payment History (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .454 B3-5.3-03, Previous Mortgage Payment History (07/25/2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .455 B3-5.3-04, Inquiries: Recent Attempts to Obtain New Credit (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . .457 B3-5.3-05, Credit Utilization (05/31/2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .457 B3-5.3-06, Authorized Users of Credit (10/30/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .458 B3-5.3-07, Significant Derogatory Credit Events -- Waiting Periods and Re-establishing Credit (07/29/2014). 459 B3-5.3-08, Extenuating Circumstances for Derogatory Credit (12/16/2014) . . . . . . . . . . . . . . . . . . . . . . . .465

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