May 4, 2013: A profusion of investor & lender updates; a corny joke; how much does that house rent for?
Rob Chrisman

Happy Star Wars Day. May the Fourth be with you!


Many areas of the nation are experiencing rebounds in housing prices. Some of that is due to first time home buyers, some due to move-up buyers or buyers re-entering the market after a short sale or foreclosure, and some due to investors picking up non-owner occupied homes. In this latter group, a portion is due to local folks picking up a rental house, and a portion is due to large venture capital funds (such as Blackstone, Tricon Capital, Sylvan Road Capital, or a myriad of others) buying them.


Whether it is a local dentist or a fund backed by billions of dollars buying non-owner properties, how do they determine the rent? Well, wouldn’t you know that an enterprising company tells them what the market rents are! Bloomberg’s Karen Weise and Heather Perlberg ( write, “Using data from 12 million properties around the country, RentRange LLC, Charnoff’s six-year-old company, can estimate how much monthly rent a home is likely to generate. That helps drive the data-hungry financial models private-equity firms use to determine where to buy distressed houses to convert to rentals.”


The cavalcade of investor, MI, agency, and vendor news never seems to stop. As always, it is best to read the actual bulletin for full details, but these will give you a sense of the trends out there. So let’s catch up by taking a look at some relatively recent updates!


PennyMac has removed various overlays as part of its alignment with Fannie Mae and Freddie Mac guidance and is now accepting FNMA High Balance and FHMLC Super Conforming transactions with FICO scores as low as 620.  As per GSE guidelines, borrowers may be removed from DU Refi Plus loans; DU Refi Plus loans with Radian, PMI, or MGIC mortgage insurance will be accepted; Down Payment Assistance provided by a government entity will be accepted; and model home leasebacks will be considered eligible so long as the transaction is closed as non-owner occupied.  PennyMac has also aligned its LTV and "warrantability" requirements for attached Florida condos with those of the GSEs, replacing its previous limit of 75% LTV for such owner-occupied properties and 70% LTV for second homes.


Kinecta has teamed up with Essent Guaranty to roll out its new Savings Advantage product, an ARM that offers borrowers the ability to borrow $1.25 million with an LTV up to 89%.  Savings Advantage loans are now available to lock, and full pricing details are available via the Kinecta rate sheet.


MSI has clarified that it will underwrite mortgages on residential properties of up to 20 acres, provided that both the appraiser and underwriter address the acreage issue, the property is zoned as residential and is not income-producing, similar comparable sales are provided, and site value does not exceed 30% of the total property value.  Properties that are zoned agricultural are limited to 10 acres, and any values based on a lesser amount of acreage than the actual lot size will not be accepted.


Effective immediately for all products, MSI will apply its short sale/foreclosure guidelines to any borrower whose credit history shows a modified mortgage loan.  As a reminder, MSI does not accept properties that have modified/restructured mortgages for refinance transactions.


As per the changes announced earlier this year, MSI has aligned its guidelines with those of the USDA for all relevant products.  These changes affect guidelines on assets, bankruptcy, cash back at close, collection amounts, credit considerations, digital signatures, disputed credit trade lines, Earnest Money Deposits, income documentation, income special consideration, inspection requirements, principal reduction, private roads, REO appraisals, the Definition of Conventional Credit, and manual underwriting.  The MSI USDA Product Suite has been updated accordingly and can be accessed at


Carrington Mortgage is fast expanding its wholesale activity, having recently added sales manager James Torrence to its team along with 13 new account executives across the U.S.  The company also launched its 30-Day Loan Closing Program and FHA Streamline Ready to Close Program earlier this year, both of which aim to better serve brokers and their realtor partners, and expects to offer FHA 203(k) loans in the near future through its wholesale lending division.


United Guaranty will be updating its HFA underwriting requirements such that the expanded minimum borrower contribution will be eligible in all markets, LTVs are being capped at 95% in cases where the borrower contribution is satisfied using gifts/grants, and additional requirements will apply when using the expanded requirements for subordinate financing and/or minimum borrower contribution.  The changes will go into effect for all new applications dated May 13th or after, and as a reminder, the HFA guidelines apply only when the subordinate financing and/or minimum borrower contribution are being used for the loan.


Also effective as of May 13th, UG will no longer publish the Geographic Quality index classification due to the general improvement of the U.S. housing market.


New Jersey-based risk management firm Secure Settlements has announced the launch of two new lender subscription fraud tool programs that allow lenders to better evaluate, monitor, and report closing agent risk.  Closing Guard™ allows banks to handle their own risk management instead of using agents; however, the agent-paid model will remain in place, as agents can opt to become vetted and join the SSI National Closing Agent Database for an annual fee.  The new Closing Guard™ program provides lenders with the capability to perform a scaled-down vetting process that produces results in less than 50 minutes and serves as a cost-effective system for those who don’t require a full system to be built internally.   To find out more about the new programs and about Secure Settlements, go to


Citadel Servicing, as part of its non-prime wholesale lending offerings, is accepting owner-occupied properties with MTG lates and LTVs of up to 75%, owner-occupied properties with foreclosure and bankruptcy of more than two years with LTVs up to 70%, and transactions with up to 50% DTI and FICO scores as low as 500.  In order to qualify, appraisals must be current to guidelines, have a $0 invoice, and be ordered in compliance with HVCC.  See the current rate sheet for full details


The FHA has updated the Lender Insurance Program, the full details of which are reflected in the Lender Insurance Guide (  The revised parameters state that, in order to be eligible for Lender Insurance, a mortgagee’s previous two-year claim cannot exceed the default rate to the two-year claim and default rate for the states in which the mortgagee has underwritten FHA-insured loans; applicants are also required to have an Unconditional Direct Endorsement approval.  HUD has established processes for ongoing performance reviews, approving new mortgagees created through corporate mergers and acquisitions that don’t yet have a two-year claim and default rate history, and re-instating Lender Insurance for mortgagees who had their authority withdraw or terminated.  The updated program requirements also allow HUD to demand indemnification against potential losses in instances of fraud, misrepresentation, or “serious and material violation of HUD requirements.”


Freddie Mac servicers are reminded that the new requirements for selecting and managing law firms handling bankruptcies and default-related legal services go into effect on June 1s.  Servicers should submit a Servicer Selection Firm for each law firm to Freddie to review via the Servicing Attorney Tracking website, registration details for which are available at  If accepted, Freddie will issue the law firm with a Limited Retention Agreement, which must be signed and returned, after which point the firm must complete the new law firm tutorials for each jurisdiction in which it is retained.  After the LRA has been executed and returned to the firm, servicers will be notified that the firm is eligible to receive new referrals on or after June 1st.  Servicers are also reminded that they should be prepared to perform all valuation orders and foreclosure sale bidding requirements on first lien mortgages not covered by mortgage insurance for all foreclosure sales conducted on or after that date.


Freddie has issued a reminder about the implementation of Phase I of the conversion of the current Uniform Appraisal Dataset compliance warning edits to fatal edits in the UCDP, which is scheduled to take place on June 22nd.  This first phase will affect the appraisal effective date, subject contract price/comparable sale price, above grade Gross Living Area, and sale type data fields.  Freddie will also begin implementing proprietary appraisal quality messages in the UCDP on the 22nd, which will provide users with an early view into appraisal quality for any potential collateral risk.


As part of its pre- and post-purchase suspense analysis, Citi has identified the loss payable mortgagee clause on hazard and flood insurance as a consistent problem area.  This should be written as “CitiMortgage, Inc., Its Successors and/or Assigns.”  Insurance policies that do not contain either “ISAOA” or “Its Successors and/or Assigns” in the loss payee clause will cause a suspense condition to place on the file.


Franklin American has updated several Conventional product guidelines to reduce the minimum FICO score for 1-unit cash-out refinances with LTVs over 80 from 720 to 680; allow Mortgage Credit Certificates on fixed rate transactions and 10- and 25-year terms on fixed rate DU Refi Plus, accept Notices of Action for borrowers who hold acceptable visa types after their visas have expired, and expand the Liabilities section of the Selling Guide to include the definition and qualification requirements of a single payment note.  The Guide has also been revised to clarify the phrase “Realtor/broker acting as a listing/selling agent as well as the mortgage broker” such that commercial real estate brokers are differentiated from residential brokers.   For VA IRRRL loans, the appraisal requirement has been removed in cases where FAMC is the current servicer. 


With regards to FHA guideline updates, FHA refinances with cases numbers that include prior loan indemnification notices are now required to be underwritten as full credit-qualifying refinances with an appraisal and reflected in FHA Connection as a credit-qualifying streamline, rate/term, or cash-out refinance transaction.  FAMC has also clarified its definition of “family members” as it relates to gifts of equity transactions to comply with the FHA’s recently released FAQs and has aligned its down payment assistance guidelines to align with FHA guidelines, which require the funds being disbursed from the approve entity to be disbursed on the HUD-1,  The income guidelines for USDA loans have been updated to include the instances in which adjustments may be made to Adjusted Annual gross income, which include qualifying elderly household members and taking care of household members with disabilities, and, effective for both USDA and Conventional products, FAMC has extended the property flipping guidelines to allow the sales price to increase by more than 20% within 90 days when it can be justified and properly documented.


Effective for all products apart from Conventional Non-conforming Jumbo Fixed Rate, FAMC has clarified that all properties zoned non-conforming require documentation explaining why the property is considered Legal Non-Conforming and an Existing Use Permit/Rebuild Letter stating that the structure can be rebuilt following the same general footprint and density without meeting current standard development requirements in the event of significant destruction.  The appraisal must also indicate that the property is Legal Non-conforming.



A woman brought a very limp duck into a veterinary surgeon. As she laid her pet on the table, the vet pulled out his stethoscope and listened to the bird's chest.
After a moment or two, the vet shook his head and sadly said, "I'm sorry, your duck, Cuddles, has passed away."
The distressed woman wailed, "Are you sure?"

"Yes, I am sure. Your duck is dead," replied the vet.
"How can you be so sure?" she protested. "I mean you haven't done any testing on him or anything. He might just be in a coma or something."
The vet rolled his eyes, turned around and left the room. He returned a few minutes later with a black Labrador Retriever. As the duck's owner looked on in amazement, the dog stood on his hind legs, put his front paws on the examination table and sniffed the duck from top to bottom. He then looked up at the vet with sad eyes and shook his head.
The vet patted the dog on the head and took it out of the room. A few minutes later he returned with a cat. The cat jumped on the table and also delicately sniffed the bird from head to foot. The cat sat back on its haunches, shook its head, meowed softly and strolled out of the room.
The vet looked at the woman and said, "I'm sorry, but as I said, this is most definitely, 100% certifiably, a dead duck."
The vet turned to his computer terminal, hit a few keys and produced a bill, which he handed to the woman.
The duck's owner, still in shock, took the bill. "$150!" she cried, "$150 just to tell me my duck is dead!"
The vet shrugged, "I'm sorry. If you had just taken my word for it, the bill would have been $20, but with the Lab Report and the Cat Scan, it's now $150.”



If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at The current blog is, “How Changes in FHA Loan Pricing Will Lead to Changes in Investor Demand." If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.


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Copyright - Rob Chrisman