MPF Announcement 2019-73

MPF Direct Product Origination and Underwriting Updates

Effective Date: Effective dates are as noted for each individual update

The Investor for the MPF Direct Product, Redwood Residential Acquisition Corporation, has recently made  updates which affect the Select QM (Exhibit Q-D), Select Non-QM (Exhibit V-D), Select 90 QM (Exhibit R-D), Choice QM (Exhibit S-D), Choice Non-QM (Exhibit W-D) product guides and the Jumbo Program Eligibility Supplement (Exhibit T-D).  

(Please note effective dates are specific to each change; please refer to the updates below for the effective dates.)

Quick Reference Guides
Select QM, Select Non-QM, Choice QM & Choice Non-QM

Effective for loans locked on or after 1/02/2020

• Revised the cash out limits from $250,000 to $500,000 for all occupancy types.

Quick Reference Guides 
Select QM & Select Non-QM

Effective date for new minimum loan amounts will be for locks on or after 1/02/2020.

• Revised the minimum loan amount from $484,351 to $510,401 for 1-unit properties. The minimum loan amount for properties with 2-4 units is $1 over the new conforming loan amount set by FHFA.

Eligibility Matrix Footnotes
Select 90 QM, Choice QM & Choice Non-QM

Effective date for new minimum loan amounts will be for locks on or after 1/02/2020.

• The minimum loan amount referenced in these guides is $1 over the current conforming/agency high balance limit set by FHFA. No update is necessary for these guides since a specific loan amount is not referenced.

Underwriting Guidelines | Credit   
Choice QM & Choice Non-QM

Effective for loans locked on or after 1/02/2020

• Added requirement for letter of explanation from borrower(s) for late payments within the most recent 24 months. Also added requirement for letter of explanation from borrower(s) for derogatory credit events.

Underwriting Guidelines | Liabilities
Select QM, Select Non-QM, Select 90 QM, Choice QM & Choice Non-QM

No effective date due to clarification.

• Language added for borrowers that are on a payment plan with the IRS for the most recent tax year. See guidelines for additional information

Underwriting Guidelines | Assets  
No effective date due to clarification. 

• Added clarification for eligible assets to be held in a US account.

Underwriting Guidelines | Assets  
Select QM, Select Non-QM, Select 90 QM, Choice QM & Choice Non-QM

Effective for loans locked on or after 1/02/2020.

• Updated business funds for assets when borrower is a majority owner but less 100% owner of the business.  See specific guidelines for requirements.

Underwriting Guidelines | Assets  
Choice QM

Effective for loans locked on or after 1/02/2020. 

• Updated the reserve requirements for Additional 1-4 Unit Financed REO due to the change to allow unlimited number of financed properties when the subject transaction is a primary residence.

Underwriting Guidelines Income/Employment   
Select QM, Select Non-QM, Select 90 QM, Choice QM & Choice Non-QM

Effective for all loans delivered to Redwood on or after 12/28/2019.  

• Added requirement for taxpayer consent form signed by all borrowers.See MPF Announcement 2019-63 and Redwood Compliance Announcement 2019.11-06 for additional requirements or information.

Underwriting Guidelines | Income & Employment | Asset Depletion   
Select Non-QM and Choice Non-QM

No effective date due to clarification. 

• Added clarification for eligible assets for asset depletion to be held in a US account.

Underwriting Guidelines | Income & Employment | Rental Income   

Select Non-QM and Choice Non-QM

Effective for loans locked on or after 1/02/2020. 

• Added requirement for short-term, vacation or seasonal investment property without a lease (subject or non-subject); if there is an HOA for condominiums or attached PUDs, it must allow for short-term rentals and verification must be included in the loan file. 

Underwriting Guidelines | Multiple Financed Properties  
Choice QM & Choice Non-QM

Effective for loans locked on or after 1/02/2020.

• Updated to allow unlimited number of financed 1-4-unit residential properties when the subject transaction is a primary residence. Subject transaction is limited to program maximum or 80% LTV/CLTV/HCLTV and additional financed properties require 6 months reserves for each additional property.

General Borrower Requirements | Primary Residence  
Jumbo Program Eligibility Supplement 

No effective date due to clarification.

• Clarification added for occupancy on primary residence refinance transactions.  For existing properties, borrowers must occupy at the time of the transaction.

General Borrower Requirements | Texas Owner Occupied Homestead Property  
Jumbo Program Eligibility Supplement

No effective date due to clarification.

• Reorganized the Texas Equity Refinance Loan Requirements section for a clearer set of requirements for standard refinance loans, Texas section 50(a)(6) and Texas section 50(f)(2) loans. 

General Borrower Requirements | Inter Vivos Revocable Trust
Jumbo Program Eligibility Supplement

Effective immediately.

• Removed the requirement for copies of the first page, signature page, and the pages of the trust agreement that verifies the trustee and that the trust is revocable when a trust certification form is provided.

General Borrower Requirements | Regulatory Compliance | TILA
Jumbo Program Eligibility Supplement

Effective for loan applications taken on or after 1/01/2020.

• The threshold for the 3% maximum allowable points will increase to $109,898.

Exhibit K-D- Exception Request Form

• The new form includes a request for the Loan Estimate (LE) to be included in the exception submission.

MPF Direct Quick Reference Guides

• The Quick Reference Guide for QM Programs Only (Exhibit X-D) and the Quick Reference Guide for All Programs (Exhibit Y-D) have been updated to reflect the applicable changes indicated in this announcement.