COVID-19 Temporary Overlays Conforming Underwriting Guideline—August 17, 2020

This document is an update and consolidation of multiple announcements beginning in late March 2020 and relates to temporary amendments to the AIG Conforming Underwriting Guidelines. Additional updates will be provided when applicable. Eligibility is based on the effective date compared to the lock date. Please contact Shane Larscheid, Vice President of Sales, with any questions.

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

Loan Age at Time of Delivery (effective 7/28/2020)

Loans aged beyond 30 days from closing at the time of delivery to AIG, may require a recertification of value.

Verification of Income & Employment (VOE) Requirements (effective 3/25/2020-updated 7/28/2020)

AIG will follow Fannie Mae© LL-2020-03 issued on 3/31/2020, and updated on 7/9/2020, related to VOE requirements.

The Seller must ensure that the borrower is currently employed at the time of loan closing, and all income sources must be reviewed carefully to ensure that the income will continue at the same or similar levels when qualifying the borrower.

**Updated 8/17/2020-No Longer Required** Prior to Purchase Re-verification of Employment

The requirement for re-verification of employment prior to purchase is no longer required for loans not yet purchased by AIG.

Income Documentation Age (effective 4/15/2020)

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

Verification of Self-Employment Income (effective 3/25/2020 and updated 7/28/2020)

AIG will follow Fannie Mae LL- 2020-03 guidance issued on 3/31/2020, and updated on 7/9/2020, related to employment verification requirements.

The Seller must ensure that the borrower is currently employed at the time of the loan closing, and all income sources must be reviewed carefully to ensure that the income will continue at the same or similar levels when qualifying the borrower.

  • Tax Transcript/4506T see section below for guidance.
  • A third-party verification of self-employment must be completed by the Seller within 10 business days of the Note date. Below are examples from Fannie Mae© of methods the lender 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); The certification must be provided by a third-party source, must include contact information and is ineligible when provided by the borrower(s); or
    • business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled).

Year-to-Date Profit & Loss Statements (effective 7/28/2020)

Sellers should refer to Fannie Mae guidance as provided in LL-2020-03 updated July 9, 2020 related to year-to-date Profit & Loss.

Small Business Administration Loans (effective 7/28/2020)

Proceeds from the Small Business Administration Paycheck Protection Program (PPP) or any other similar COVID-19 related loans or grants are not considered business assets. Refer to the “CARES Act” for additional information. If it is determined that any portion of the PPP loan must be repaid, borrowers will need to qualify with the payment.

IRS Tax Filing Extension (effective 3/27/2020)

We recognize the IRS tax deadline extension for filing 2019 returns.

Tax Transcripts/4506T (effective 4/1/2020 and updated 7/28/2020)

When transcripts are required and not available (per AIG Conforming Underwriting Guidelines); AIG will require one of the following:

  • Tax return transcripts provided within 90 days of purchase.
  • A verification of deposits VOD verifying all assets used in underwriting, this is in addition to the standard asset documentation required for underwriting. (example: market-based assets require the most recent two months or quarterly statements).
  • A verification of the income directly from the employer or the Work Number database.

Mortgage & Rental Payment Histories-All Transactions (effective 4/29/2020-updated 7/28/2020)

AIG is providing overlays to Fannie Mae’s temporary Purchase and Refinance eligibility requirements, announced in LL- 2020-03 and updated 7/9/2020;

  • All rent payment histories must be documented with a Verification of Rent (VOR) from the landlord or a third-party payment history.
  • No mortgage loans or rental agreements for which the borrower is obligated may be in forbearance, including co-signed mortgage loans and rental agreements.
  • Loans to borrowers who have exited forbearance on a mortgage or rental agreement which is current*, must document the following:
    • Borrower has exited forbearance
    • The mortgage/rent is not in a repayment plan or loss mitigation program and the mortgage/rent is current*. AIG will align with Fannie Mae’s additional due diligence requirements to document the loan is current*.

Loans to borrowers that have exited forbearance on a mortgage or rent which is not current (borrower missed payments during the forbearance period), are eligible for purchase with the following documentation:

  • Borrower has exited forbearance
  • Missed payments were resolved through the following:
    • Borrower reinstated the mortgage or rent by making all missed payment prior to the date printed on the Note.
      • If reinstatement occurs after the application date, the source of funds must be documented.
      • New loan proceeds cannot be used for reinstatement.
    • Borrower made at least three consecutive timely payments under or completed a loss mitigation program prior to the date printed on the Note.
      • Payments or completion may occur during origination.
      • Loan proceeds may be used to pay off the remaining payments of a repayment plan, deferral amount or a modified mortgage.

*Current as defined by Fannie Mae in LL- 2020-03 updated 7/9/2020.

Asset Documentation Age (effective 4/15/2020)

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

Market-based Assets (effective 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 to be considered as reserves, must be documented with the most recent two months or quarterly statements.

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

Appraisal Requirements for Conforming Mortgage Loans (effective 3/25/2020 updated 7/28/2020)

AIG will follow the guidance provided by Fannie Mae© in their LL- 2020-04 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 is required.

Condominium Project Reviews (effective 7/28/2020)

AIG will follow the guidance provided by Fannie Mae© in their COVID-19 release LL-2020-04, updated 7/9/2020, Flexibilities for Condominium Project Review.

Electronic Notarizations (effective 4/1/2020)

Electronic notarizations are eligible in accordance with Fannie Mae© LL-2020-03 updated 7/9/2020, however, AIG is unable to purchase loans with e-Notes.

Powers of Attorney (effective 7/28/2020)

AIG is not aligning with Fannie Mae© LL-2020-03 temporary policies for the use of a power of attorney.

Waiting Period Waivers (effective 3/25/2020)

Waiting period waivers are considered ineligible.

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, and updated 7/28/2020)

Gap coverage is acceptable for matters arising between the loan closing and the mortgage recording if the:

  • County recorder’s office is closed due to COVID-19 related disruptions.
  • Closed loan package includes an affidavit signed and dated by all borrowers, providing indemnification against intervening liens.
  • Effective date of the title policy is the same as the Note date in non-escrow states or notary date on the Security Instrument for escrow states.
  • Coverage complies with FNMA requirements, as well as federal, state and local laws.

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.

Loans Closed in a Trust (effective 7/28/2020)

Loans closed in a Trust are ineligible for purchase.

Properties with Age-Related Deed Restrictions (effective 7/28/2020)

Properties with age-related Deed restrictions that limit transferability of title; or contain a “first right of refusal” are ineligible for purchase.

Residency Status (effective 7/28/2020)

Loans which include a borrower with a residency status of Non-Permanent resident are ineligible for purchase.

Escrow Holdbacks (effective 7/28/2020)

Escrow holdbacks for any purpose other than weather related items are ineligible for purchase