FAQ: Top Trending Selling FAQs

These are the top trending underwriting and eligibility questions customers have asked us. Visit Ask Poli® to see trending content, find more answers, filter content by topic, and view recently added questions. FAQs updated August 23, 2024

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Asset Assessment

How do I calculate the 20% liquidation threshold for vested assets?

Stocks, Stock Options, Bonds, and Mutual Funds

• if the value of the asset is at least 20% more than the amount of funds needed for the down payment and closing costs, no documentation of the borrower’s actual receipt of funds realized from the sale or liquidation is required. Otherwise, evidence of the borrower’s actual receipt of funds realized from the sale or liquidation must be documented.

When used for reserves:

• 100% of the value of the assets may be considered, and liquidation is not required.

Example #1 Scenario. Total borrower funds needed to close is $30,000. Borrower has $33,400 in verified assets ($25,000 in a checking account and $8,400 in a retirement account invested in mutual funds).

Policy Direction:

1. Subtract the checking account assets of $25,000 from the total funds required to close. Evidence of liquidation is not required for these types of accounts.

$30,000 - $25,000 = $5,000 additional funds needed.

1. Compare the $8,400 in the retirement account to the additional $5,000 of funds needed to determine if evidence of liquidation is required.

• $5,000 X 20% = $1,000.
• $5,000 + $1,000 = $6,000

Because the borrower has more than $6,000 in a retirement account, evidence of liquidation is NOT required.

Example #2 Scenario. Total borrower funds needed to close is $20,000. Borrower has $22,000 in verified assets ($2,000 in a checking account and $20,000 invested in a stock account).

Policy Direction:

1. Subtract the checking account assets of $2,000 from the total funds required to close. Evidence of liquidation is not required for these types of accounts.

$20,000 - $2,000 = $18,000 additional funds needed.

1. Compare the $20,000 in the stock account to the additional $18,000 of funds needed to determine if evidence of liquidation is required.

• $18,000 X 20% = $3,600.
• $18,000 + $3,600 = $21,600

Because the borrower has less than $21,600 in the stock account, evidence of liquidation IS required.

What are the maximum interested party contributions limits?

IPCs that exceed these limits are considered sales concessions. The property’s sales price must be adjusted downward to reflect the amount of contribution that exceeds the maximum, and the maximum LTV/CLTV ratios must be recalculated using the reduced sales price or appraised value.

1. See B5-4.2-03, Loans Secured by HomePath Properties (05/31/2016) for an exception to this limit for principal residence transactions.

Credit Assessment

Can the borrower have a foreign address?

To obtain a credit report that is compatible with DU loan casefile requirements, the borrower's present address must be within the U.S. or U.S. territories, with the exception of an Army Post Office (APO), Fleet Post Office (FPO), or Diplomatic Post Office (DPO) military address. Borrowers with foreign credit reports must be manually underwritten. Note: Loans secured by a second home or an investment property must be underwritten in DU and receive an Approve/Eligible recommendation.

What is required for borrowers using a foreign credit report?

If the lender relies on credit reports from foreign countries to document borrower credit histories, the credit report must meet the requirements and standards for domestic reports, and must be completed in English or include an English translation.

Foreign Credit Reports and Credit Scores

With the exception of loan casefiles underwritten through DU, Fannie Mae permits the lender to use a credit report from a foreign country to document a borrower's credit history. If a credit score is provided with the foreign credit report it cannot be used to establish eligibility, or be delivered to Fannie Mae unless the credit score is the classic FICO, as required by B3-5.1-01, General Requirements for Credit Scores. See Section B3-5.4, Nontraditional Credit History, for requirements that apply when a loan includes a borrower without an acceptable credit score.

Does each borrower need to document a housing payment history to satisfy nontraditional credit requirements?

If at least one borrower on the loan can document a housing payment as a nontraditional credit reference, the loan has met the housing payment history requirement. The lender is not required to obtain documentation of a housing payment history for other nontraditional credit borrowers on the loan. However, the lender must still document the minimum number of nontraditional credit references required for each nontraditional credit borrower. If two or more borrowers on a loan share the housing-related reference (for example, they are both named on the lease for the property in which they are living), that documentation counts as one nontraditional credit reference for each borrower, even if only one borrower has been making the payments. Note: If the credit report contains a housing payment reference and it includes the required information, including payment history, then the lender may use that housing payment reference as an acceptable nontraditional credit reference. For examples of acceptable housing payments to fulfill this housing payment history requirement, see B3-5.4-02, Number and Types of Nontraditional Credit References.

When using nontraditional credit what if no borrowers have a housing payment history reference?

Loans underwritten through DU where a nontraditional credit history is required must include housing payments as one reference of nontraditional credit. Loans underwritten manually are not required to have a housing payment as one reference of nontraditional credit. However, if no borrower on the loan has a housing history, a minimum of 12 months’ reserves must be documented.