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Correspondent Lending COVID-19 Guideline Clarification and
Updates—April 1, 2020

COVID-19 Guideline Clarification and Updates

April 1, 2020 (update to announcement released March 25, 2020)

With so many questions related to the impact COVID-19 will have on our industry in the coming weeks and months; we’re providing some guidance on a variety of topics related to questions received by our Sales and Underwriting Teams. 

This document should be considered a temporary amendment to the AIG Conforming Underwriting Guidelines and the AIG Jumbo Underwriting Guidelines.  Further updates will be communicated in a timely manner. Please contact us with any questions or concerns.

Please see the effective date added to each guideline topic. This guidance applies to all loans not yet purchased.

 

AIG Conforming Underwriting Guidelines

Verification of Income & Employment Requirements (effective 3/25/2020)

  • In order to assist Sellers AIG will follow Fannie Mae© COVID-19 guidance issued on 3/31/2020, related to employment verification options. AIG will however be adding a suspense condition for an updated VOE prior to purchase. This condition should be the last suspense item that you address. Once the remedy has been accepted, the loan will be sent for pre-purchase review.
    • The updated VOE is acceptable in the form of a verbal verification of employment, a written verification of employment, or an email verification of employment.  An email verification of employment must come directly from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment status.
  • All gaps in employment must be addressed.

The Seller must take every precaution necessary to ensure the borrower is currently employed at the time of loan closing. All income sources should be reviewed carefully to ensure that the income will continue at the same or similar levels when qualifying the borrower.

Verification of Self-Employment (effective immediately)

Verification of self-employment must be completed within 10 business days of the Note date. 

Below are examples from the Fannie Mae© Announcement 3/31/2020 of methods the seller may use to confirm the borrower’s business is currently operating:

  • Evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self-employment);
  • evidence of current business receipts within 10 days of the note date (payment for services performed);
  • lender certification the business is open and operating (lender confirmed through a phone call or other means); or
  • Business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled).

Reminder: All other documentation requirements as detailed in our Conforming Underwriting Guidelines must be met in order to ensure compliance.

Tax Transcripts/4506T (effective immediately)

As a result of the IRS’ closure of the 4506 Tax Transcript system; we will temporarily accept files without tax transcripts when the file contains a 4506T signed at closing. We will require that the transcripts be provided at such time that the IRS has resumed the tax transcript processing. A post purchase condition will be added to each loan, and will need to be satisfied at a later date.

If a borrower is being qualified with base employment income and not additional income reported on the tax returns, the transcripts will not be required at a later time.

Income Documentation Age (effective for loans closed on or after 4/15/2020)

Paystubs and written verification of employment must be dated within 60 days of the Note date until further notice.

Asset Documentation Age (effective for loans closed on or after 4/15/2020)

Bank statements and verification of deposits must be dated within 60 days of the Note date until further notice.

Market-based Assets (effective for loans closed on or after 4/15/2020)

Market-based assets used for down payment or closing costs must be documented with evidence of liquidation in the closed loan package.

Market-based assets used for reserves must be valued at 70% of the value balance until further notice.

Appraisal Requirements for Conforming Mortgage Loans (effective 3/25/2020)

We will follow the guidance provided by Fannie Mae© in their COVID-19 release on 3/31/2020 as it relates to appraisal requirements.

When obtaining exterior-only appraisals in place of a full appraisal report, Sellers must provide documentation in the file to evidence Fannie Mae’s ownership of the loan being refinanced. For refinances of non-Fannie Mae owned loans and all cash-out refinances, a traditional appraisal.

Electronic Notarizations (effective immediately)

Electronic notarizations are eligible in accordance with the Fannie Mae© Single-Family Seller’s Letter updated 3/31/2020; with the exception of loans containing e-Notes as AIG does not currently purchase loans with e-Notes.

Powers of Attorney (effective immediately)

Powers of Attorney are eligible in accordance with Fannie Mae© Single-Family Seller’s Letter updated 3/31/2020; with the exception of loans containing e-Notes as AIG does not currently purchase loans with e-Notes.

Waiting Period Waivers (effective 3/25/2020)

We are not currently purchasing loans with waived waiting periods related to TRID.

Note Endorsements/Allonges (effective 3/25/2020)

All note endorsements or allonges must include a wet signature.

E-Recording (effective 3/25/2020)

AIG will continue to accept electronically recorded (e-recorded) security instruments, where allowed within state and county guidelines. A copy of the e-recorded instrument with recording information, and the original security instrument, should be forwarded to our custodian, Bank of New York Mellon, as a trailing document.

Gap Insurance Related to Recording Delays (effective 3/25/2020)

Gap coverage is acceptable for matters arising between the loan closing and the mortgage recording.  All loans must contain the Preliminary Title commitment at the time of receipt of the closed loan package, with no exception under Schedule B for the gap coverage.

 

AIG Jumbo Underwriting Guidelines

Verification of Income and Employment Requirements (effective 3/25/2020)

  • Per our current guidelines, Verbal verifications of employment dated within 10 business days of the Note date will continue to be required; however, in order to temporarily assist Sellers during this challenging time, the verbal VOE (VVOE) may be substituted by a written VOE or Email VOE dated within the same time frame.
    • Email VOE – an email directly from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment status
  • An updated VOE (in any of the three formats) must be completed prior to AIG’s loan purchase. A suspense condition for a Verbal VOE prior to purchase will be added to each loan and should be the last suspense item that you address.  Once the remedy has been accepted, the loan will be sent for pre-purchase review.

Income Documentation Age (effective for loans closed on or after 4/15/2020)

Paystubs and written verification of employment must be dated within 60 days of the Note date until further notice.

Self-Employment Income (effective 3/25/2020)

Self-employment income must continue to be documented in accordance with Ability-to-Repay requirements.

A third party verification of employment must be provided within 10 business days of the Note date.  Below are examples from the Fannie Mae© Announcement update dated 3/31/2020 of methods the seller may use to confirm the borrower’s business is currently operating:

  • Evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self-employment);
  • evidence of current business receipts within 10 days of the note date (payment for services performed);
  • lender certification the business is open and operating (lender confirmed through a phone call or other means); or
  • Business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled).

The Seller must take every precaution necessary to ensure the borrower is currently employed at the time of loan closing. All income sources should be reviewed carefully to ensure that the income will continue at the same or similar levels when qualifying the borrower.

Reminder: All other documentation requirements as detailed in our Jumbo Underwriting Guidelines must be met in order to ensure compliance with the Ability-to-Repay/QM requirements.

IRS Tax Filing Extension (effective 3/25/2020)

We recognize the IRS tax deadline extension for filing 2019 returns. Jumbo Mortgage Loans must include Year-to-Date Profit and Loss Statement and Balance Sheet when self-employment income is present in the loan file.

Tax Transcripts/4506T (effective immediately)

As a result of the IRS’ closure of the 4506 Tax Transcript system; we will temporarily accept files without tax transcripts when the file contains a 4506T signed at closing. We will require that the transcripts be provided at such time that the IRS has resumed the tax transcript processing. A post purchase condition will be added to each loan, and will need to be satisfied at a later date.

If a borrower is being qualified with base employment income and not additional income reported on the tax returns, the transcripts will not be required at a later time.

Reminder: We still require all income documentation to be provided prior to, and all tax returns to be signed and dated prior to the date of consummation in order to be compliant with QM requirements.

Asset Documentation Age (effective for loans closed on or after 4/15/2020)

Bank statements and verification of deposits must be dated within 60 days of the Note date until further notice.

Appraisal Requirements for Jumbo Mortgage Loans (effective 3/25/2020)

  • Purchase and Rate & Term Refinance (1 unit primary and second homes)
    • Full 1004 Appraisal or Exterior-only Appraisal Report (2055/1075).
    • Desk Review (in accordance with AIG’s Jumbo Underwriting Guidelines). The desk review may not have a value of more than 10% below the value determined on the appraisal report.
  • Cash-out Refinance, Multi-Unit Properties and Investment Property
    • Full 1004 appraisal report
    • Desk review (in accordance with AIG’s Jumbo Underwriting Guidelines). The desk review may not have a value of more than 10% below the value determined on the appraisal report.
  • Two-Time-Close-Construction-to-Permanent Mortgages
    • Full appraisal
    • Final inspection (no exceptions)
    • Desk Review (in accordance with AIG’s Jumbo Underwriting Guidelines). The desk review may not have a value of more than 10% below the value determined on the appraisal report.

Electronic Notarizations (effective 3/31/2020)

Electronic notarizations are eligible in accordance with the Fannie Mae© Single-Family Seller’s Letter updated 3/31/2020; with the exception of loans containing e-Notes as AIG does not currently purchase loans with e-Notes.

Waiting Period Waivers (effective 3/25/2020)

We are not currently purchasing loans with waived waiting periods related to TRID.

Note Endorsements/Allonges (effective 3/25/2020)

All note endorsements or allonges must include a wet signature.

E-Recording (effective 3/25/2020)

AIG will continue to accept electronically recorded (e-recorded) security instruments, where allowed within state and county guidelines. A copy of the e-recorded instrument with recording information, and the original security instrument, should be forwarded to our custodian, Bank of New York Mellon, as a trailing document.

Gap Insurance Related to Recording Delays (effective 3/25/2020)

Gap coverage is acceptable for matters arising between the loan closing and the mortgage recording.  All loans must contain the Preliminary Title commitment at the time of receipt of the closed loan package, with no exception under Schedule B for the gap coverage.

Powers of Attorney (effective immediately)

We will follow the Fannie Mae guidance related to powers of attorney; with the exception of loans containing e-Notes as AIG does not currently purchase loans with e-Notes.