Non-QM Mortgage Program - Silvergate Bank

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

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

1.11

1.12

1.13

1.14

1.15

1.16

1.17

1.18

1.19

1.20

1.21

1.22

1.23

1.24

Overview ............................................................................................................................................................... 1

Closed Loans Only.............................................................................................................................................. 1

Ability to Repay (ATR) ..................................................................................................................................... 1

Manual Underwriting Requirement ........................................................................................................... 1

QM Review ............................................................................................................................................................ 2

Qualifying Rate (ARMs) ................................................................................................................................... 2

Fannie Mae Guideline Reference ................................................................................................................. 2

Zero Fraud Tolerance....................................................................................................................................... 2

Fair Lending Policy............................................................................................................................................ 3

Points and Fees ................................................................................................................................................... 3

Higher-Priced Mortgage Loan (HPML) Eligibility ................................................................................ 3

HOEPA High-Cost (Section 32) Loans Not Eligible .............................................................................. 3

Ineligible Loan Features.................................................................................................................................. 3

Vesting .................................................................................................................................................................... 3

Inter Vivos Revocable Trust .......................................................................................................................... 3

Trust Agreement Requirements .................................................................................................................. 4

Power of Attorney ............................................................................................................................................. 4

Guideline Exceptions ........................................................................................................................................ 4

Minimum/Maximum Loan Amounts ......................................................................................................... 5

Assumability ........................................................................................................................................................ 5

Ineligible States .................................................................................................................................................. 5

Non-Arm¡¯s-Length Transactions ................................................................................................................. 5

Ineligible Property Types ............................................................................................................................... 5

Loans to One Borrower ................................................................................................................................... 6

3.1

3.2

3.3

3.4

Adequate and Stable Income......................................................................................................................... 6

ATR Documentation ......................................................................................................................................... 7

Debt-to-Income Ratio Requirements......................................................................................................... 7

Residual Income Requirement ..................................................................................................................... 7

2 Non-Warrantable Condominiums ........................................................................................................... 6

3 Income Qualifying .......................................................................................................................................... 6

4 Income Documentation Option (Full-Doc) .......................................................................................... 7

4.1

4.2

4.3

4.4

4.5

06/22/20

Salaried Borrowers ........................................................................................................................................... 7

Self-Employed Borrowers .............................................................................................................................. 8

Fixed Income........................................................................................................................................................ 9

Capital Gains and Losses ................................................................................................................................. 9

Farm Income ...................................................................................................................................................... 10

Confidential and Proprietary

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Non-QM Mortgage Program

Purchase Eligibility Guidelines

4.6

4.7

4.8

4.9

4.10

4.11

4.12

Interest and Dividend Income .................................................................................................................... 10

Military Income ................................................................................................................................................ 10

Note Income ....................................................................................................................................................... 10

Rental Income ................................................................................................................................................... 10

Short-Term Rental Income .......................................................................................................................... 11

Restricted Stock (RSUs) ................................................................................................................................ 11

Trust Income...................................................................................................................................................... 11

5 Alternate Income Documentation Option (Alt-Doc) ..................................................................... 12

5.1

5.2

5.3

5.4

Overview ............................................................................................................................................................. 12

5.1.1

Rents Received as Secondary Source of Income on Alt-Doc ........................................ 12

5.1.2

Short-Term Rentals ....................................................................................................................... 13

12- or 24-Month Bank Statement Program (Alt-Doc) ...................................................................... 13

12- or 24-Month 1099 Program (Alt-Doc) ............................................................................................ 15

Limited Program (Alt-Doc) .......................................................................................................................... 16

5.4.1

Asset Depletion Eligibility .......................................................................................................... 16

6 Asset Reserves ............................................................................................................................................. 17

6.1

6.2

6.3

6.4

6.5

6.6

Overview ............................................................................................................................................................. 17

Minimum Reserve Requirements ............................................................................................................. 17

Documentation of Assets .............................................................................................................................. 17

Down Payment .................................................................................................................................................. 18

Business Funds ................................................................................................................................................. 18

Unacceptable Asset Sources ........................................................................................................................ 18

7 Borrowers ...................................................................................................................................................... 19

7.1

7.2

7.3

7.4

7.5

7.6

7.7

General Definition............................................................................................................................................ 19

Customer Identification Program ............................................................................................................. 19

U.S. Citizens ........................................................................................................................................................ 19

Permanent Resident Aliens ......................................................................................................................... 19

Non-Permanent Resident Aliens (with U.S. credit) ........................................................................... 19

Non-Occupant Co-Borrowers ..................................................................................................................... 20

First-Time Homebuyers ................................................................................................................................ 20

8 Occupancy Types ........................................................................................................................................ 20

8.1

8.2

8.3

Primary Residence .......................................................................................................................................... 20

Second Home ..................................................................................................................................................... 20

Investment Property ...................................................................................................................................... 21

9 Purchase Transactions.............................................................................................................................. 21

9.1

9.2

9.3

9.4

06/22/20

Purchases ............................................................................................................................................................ 21

Owner-Occupied Residency Requirement ............................................................................................ 21

For-Sale-By-Owner (FSBO) .......................................................................................................................... 21

Gift Funds ............................................................................................................................................................ 22

Confidential and Proprietary

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Non-QM Mortgage Program

Purchase Eligibility Guidelines

9.5

9.6

9.7

9.8

9.9

Sweat Equity ...................................................................................................................................................... 22

Seller Contributions ........................................................................................................................................ 22

Property Flips .................................................................................................................................................... 22

Secondary Financing ...................................................................................................................................... 23

Departing Residences .................................................................................................................................... 23

10 Refinance Transactions ............................................................................................................................ 23

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

General Refinance Requirements.............................................................................................................. 23

Rate/Term Refinance ..................................................................................................................................... 23

Cash-Out Refinance ......................................................................................................................................... 24

Cash-Out Limits ................................................................................................................................................ 24

Seasoning ............................................................................................................................................................ 24

Properties Listed for Sale ............................................................................................................................. 24

Benefit to the Borrower ................................................................................................................................ 25

Refinance in Texas........................................................................................................................................... 25

Inherited Properties ....................................................................................................................................... 25

Buying Out a Co-Owner¡¯s Interest ............................................................................................................ 26

11 Credit Standards.......................................................................................................................................... 26

11.1

11.2

11.3

11.4

11.5

11.6

11.7

11.8

11.9

11.10

11.11

11.12

11.13

11.14

11.15

11.16

11.17

06/22/20

Mortgage/Rent.................................................................................................................................................. 26

Credit Report ..................................................................................................................................................... 26

Age of Credit Report ....................................................................................................................................... 26

Credit Scores ...................................................................................................................................................... 26

Trade Lines ......................................................................................................................................................... 27

Fraud Alerts ....................................................................................................................................................... 27

Inquiries............................................................................................................................................................... 27

Disputed Credit Accounts ............................................................................................................................. 27

Derogatory Credit ............................................................................................................................................ 27

Installment and Revolving Debts .............................................................................................................. 28

Timeshare Accounts ....................................................................................................................................... 28

Litigation ............................................................................................................................................................. 28

Consumer Credit Counseling....................................................................................................................... 28

Bankruptcy ......................................................................................................................................................... 28

Foreclosure/Deed-in-Lieu/Short Sale/Modification ........................................................................ 28

Judgment, Tax Lien, Collection, or Charge-Offs ................................................................................... 28

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

Confidential and Proprietary

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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

12.2

12.3

12.4

12.5

12.6

12.7

12.8

12.9

12.10

12.11

General Appraisal Responsibilities .......................................................................................................... 31

Uniform Residential Appraisal Report (URAR) ................................................................................... 32

Number of Appraisals and Special Requirements.............................................................................. 32

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

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

Disaster Areas ................................................................................................................................................... 35

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

Personal Property............................................................................................................................................ 37

Appraiser Qualifications ............................................................................................................................... 37

Age of Appraisal................................................................................................................................................ 38

Repair Escrows ................................................................................................................................................. 38

13 Property Insurance .................................................................................................................................... 38

13.1

13.2

13.3

13.4

06/22/20

Minimum Hazard Insurance Coverage ................................................................................................... 38

Calculating the Required Coverage Amount......................................................................................... 38

Condominium and PUD Insurance ........................................................................................................... 39

Evidence of Hazard Insurance .................................................................................................................... 40

Confidential and Proprietary

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