Accessory Units Correspondent Section 1.07 Appraisal Guidelines & Correspondent Section.01 Agency Loan Programs- Guideline Standard Agency Agency Plus Home Possible Mortgage Section 1.07 Appraisal Guidelines Appraisal Analysis: Agency Loan Programs / Site Section of the Appraisal Report Note: Below is an EXCERPT only of the LPA guidelines outlined in the above referenced section. All other currently published guidelines remain the same. Property Characteristics The "Site" section of the appraisal report must accurately describe the physical characteristics of the site, site improvements, site view and available utilities, and must fully analyze any locational factors affecting the site. Zoning The appraisal report must accurately state: The zoning classification A description of the zoning classification Whether the use of the subject property represents a legal, legal non-conforming (commonly referred to as grandfathered use), illegal use, or if there is no zoning Eligible Zoning Classification Freddie Mac does not limit mortgage purchases to mortgages secured by properties with specific zoning classifications. However, the subject property's zoning classification is an important characteristic to consider when determining whether the property is eligible for sale to Freddie Mac. For example, if a property is zoned for agricultural use, the lender must ensure that the property is residential in nature, its residential use is a permissible use under the zoning classification and its use does not primarily involve commercial activities such as farming or ranching. Eligible Zoning Compliance The use of the mortgaged premises must conform to the jurisdiction's zoning and use requirements and must be either legal non-conforming or legal conforming; however, properties located in jurisdictions with no zoning are acceptable. If the mortgaged premises is a unit in an attached condominium project, a legal non-conforming use is acceptable only if the jurisdiction in which the mortgaged premises is located allows the rebuilding of the improvements to current density in the event of partial or full destruction. For properties with land use that is legal non-conforming, the appraisal report must reflect any adverse effect the non-conforming use has on the opinion of market value. A mortgage is ineligible for sale to Freddie Mac if the mortgage is secured by property that is subject to coastal tideland, wetland or setback laws and/or regulations that prevent the rebuilding or maintenance of the property improvements if they are damaged or destroyed. Section 1.07 Appraisal Guidelines Appraisal Analysis: Agency Loan Programs / Site Section of the Appraisal Report Note: Below is an EXCERPT only of the LPA guidelines outlined in the above referenced section. All other currently published guidelines remain the same. Property Characteristics The "Site" section of the appraisal report must accurately describe the physical characteristics of the site, site improvements, site view and available utilities, and must fully analyze any locational factors affecting the site. Zoning The appraisal report must accurately state: The zoning classification A description of the zoning classification Whether the land use of the subject property represents a legal, legal non-conforming (commonly referred to as grandfathered use), illegal use, or if there is no zoning Eligible Zoning Classification Freddie Mac does not limit mortgage purchases to mortgages secured by properties with specific zoning classifications. However, the subject property's zoning classification is an important characteristic to consider when determining whether the mortgage is eligible for sale to Freddie Mac. For example, if a property is zoned for agricultural use, the lender must ensure that the property is residential in nature, its residential use is a permissible use under the zoning classification and its use does not primarily involve commercial activities such as farming or ranching. Eligible Zoning Compliance The mortgaged premises must conform to the jurisdiction's zoning and land use requirements. The zoning compliance must be either legal non-conforming or legal conforming; however, if a property has an accessory unit that does not comply with the jurisdiction s zoning and land use requirements (illegal zoning compliance), the mortgaged premises may be eligible if the Property with an Accessory Unit requirements, subsequently presented in the Improvements Section of the Appraisal Report section, are met. Mortgaged premises that are located in jurisdictions with no zoning are acceptable. If the mortgaged premises is a unit in an attached condominium project, a legal nonconforming use is acceptable only if the jurisdiction in which the mortgaged premises is located allows the rebuilding of the improvements to current density in the event of partial or full destruction. For mortgaged premises with a land use that is legal non-conforming, the appraisal report must reflect any adverse effect the non-conforming use has on the opinion of market value. A mortgage is ineligible for sale to Freddie Mac if the mortgage is secured by property that is subject to coastal tideland, wetland or setback laws and/or regulations that prevent the rebuilding or maintenance of the property improvements if they are damaged or destroyed. Page 1 of 3
Section 1.07 Appraisal Guidelines Appraisal Analysis: Agency Loan Programs / Improvements Section of the Appraisal Report Section 1.07 Appraisal Guidelines Appraisal Analysis: Agency Loan Programs / Improvements Section of the Appraisal Report Note: Below is an EXCERPT only of the LPA guidelines outlined in the above referenced section. All other currently published guidelines remain the same. Note: Below is an EXCERPT only of the LPA guidelines outlined in the above referenced section. All other currently published guidelines remain the same. Accessory Units A 1-unit detached property may have an incidental accessory unit that is incidental to the overall value and appearance of the subject property. Examples of such properties include a dwelling with a unit above a detached garage, a dwelling with a guest apartment, or a dwelling with a basement unit. The appraiser must describe the accessory unit, and analyze any effect on the value or marketability of the subject property. References: See Rental Income From the Subject 1-unit Primary Residence in the Rental Income subtopic within Section.01 Agency Loan Programs of the Correspondent Seller Guide for additional guidance. See the Rental Income from a One-Unit Primary Residence with an Accessory Unit subtopic within Section.01a: Fannie Mae HomeReady and Freddie Mac Home Possible Mortgages for additional guidance for Home Possible mortgage loans. Property with an Accessory Unit Freddie Mac will purchase an eligible mortgage on a 1-unit attached or detached property that has only one accessory unit. A mortgage is eligible if the accessory unit is either legal or legal non-conforming based on the zoning and land use requirements, and any applicable covenants or restrictions including condominium project or planned unit development (PUD) homeowners association (HOA) requirements. If the accessory unit is illegal based on the zoning and land use requirements, a mortgage is eligible according to the requirements below. A mortgage secured by a - to -unit property with one or more accessory units is not eligible for purchase by Freddie Mac. The accessory unit must include a kitchen and bathroom. Examples of such properties include a dwelling with a unit above a detached garage, a dwelling with an attached or detached guest apartment, or a dwelling with a basement unit. Some characteristics that may indicate a -unit property rather than a 1-unit property with an accessory unit include the zoning and land use requirements, covenants or HOA requirements, the existence of separate meters, separate ingress/egress or separate addresses for the units. For a 1-unit property with an accessory unit (legal or illegal zoning compliance) the appraiser must describe the accessory unit and appraise the property based on its current use. Any effect the accessory unit has on the market value or marketability of the subject property must be analyzed and reported. If the subject property accessory unit complies with the zoning and land use requirements (legal or legal non-conforming zoning compliance), the appraisal report must include at least one comparable sale with only one accessory unit. The accessory unit of the comparable sale must also comply with the zoning and land use requirements to demonstrate the conformity and marketability of the subject property to its market area. If the subject property accessory unit does not comply with the zoning and land use requirements, the mortgage is eligible if: The "Site" section of the appraisal report indicates that the accessory unit does not comply with zoning and land use requirements (illegal zoning compliance) At least two comparable sales with each having only one accessory unit must be included in the appraisal report. The accessory unit of each comparable sale must also be non-compliant with the zoning and land use requirements to demonstrate the conformity and marketability of the subject property to its market area; and The lender confirms that the existence of the accessory unit will not jeopardize future hazard insurance claims References: See Rental Income from the Subject 1-unit Primary Residence in the Rental Income subtopic within Section.01 Agency Loan Programs of the Correspondent Seller Guide for additional guidance. See the Rental Income from a One-Unit Primary Residence with an Accessory Unit subtopic within Section.01a: Fannie Mae HomeReady and Freddie Mac Home Possible Mortgages for additional Page of 3
guidance for Home Possible mortgage loans. Section 1.07 Appraisal Guidelines Appraisal Analysis: Agency Loan Programs / Comparable Sales Section 1.07 Appraisal Guidelines Appraisal Analysis: Agency Loan Programs / Comparable Sales Selection of Comparable Sales and Analysis The appraiser must report a minimum of three comparable sales as part of the sales comparison approach. The appraiser may submit more than three comparable sales to justify and support his or her opinion of market value, as long as at least three are actual settled or closed sales. Generally, the appraiser should use comparable sales that have been settled or closed within the last 1 months. However, the appraiser may use older comparable sales as additional supporting data as long as the appraiser can justify and support such use in the appraisal report. The appraiser must comment on the reasons for using any comparable sales that are more than six months old. In addition, if the appraiser believes that it is appropriate, he or she also may use contract sales (pending sales) and current listings as additional supporting market data, as long as at least three comparable sales are actual settled or closed sales. Each comparable sale that is used in the sales comparison approach must be analyzed for differences and similarities between it and the property that is being appraised. The appraiser must make appropriate adjustments for location, terms and conditions of sale, date of sale, and the physical characteristics of the properties. The proper selection of comparable properties minimizes both the need for, and the size of, any price adjustments. Requirements for properties in established subdivisions, units in established Planned Unit Developments (PUDs) or units in Established Condominium Projects For properties located in established subdivisions, units in established PUDs or units in Established Condominium Projects, the appraiser should use comparable sales from within the subject subdivision or project. Requirements for properties in new subdivisions, units in new PUDs or units in recently converted or New Condominium Projects For properties located in new subdivisions, units in new PUDs or units in recently converted or New Condominium Projects, the appraiser must use comparable sales from within the subject subdivision or project as well as comparable sales in other subdivisions or projects to help demonstrate the marketability of new developments or recently converted projects and the market value of the property. The appraiser must use: One comparable sale from inside the subject subdivision or project One comparable sale from outside the subject subdivision or project, and One comparable sale from inside or outside the subject subdivision or project If there are no settled or closed comparable sales from inside the subject subdivision or project, contract sales (pending sales) from inside the subject subdivision or project are acceptable, as long as three comparable sales are actual settled or closed sales. The comparable sale from inside the subject subdivision or project can be a sale by the builder or developer of the subject property. Comparable sales that are resales from within the subject subdivision or project are preferable to comparable sales from outside the subdivision or project provided the builder or developer of the subject property is not involved in the sale transaction. At a minimum, at least two comparable sales Selection of Comparable Sales and Analysis The appraiser must report a minimum of three comparable sales as part of the sales comparison approach. The appraiser may submit more than three comparable sales to justify and support his or her opinion of market value, as long as at least three are actual settled or closed sales. Generally, the appraiser should use comparable sales that have been settled or closed within the last 1 months. However, the appraiser may use older comparable sales as additional supporting data as long as the appraiser can justify and support such use in the appraisal report. The appraiser must comment on the reasons for using any comparable sales that are more than six months old. In addition, if the appraiser believes that it is appropriate, he or she also may use contract sales (pending sales) and current listings as additional supporting market data, as long as at least three comparable sales are actual settled or closed dates. Each comparable sale that is used in the sales comparison approach must be analyzed for differences and similarities between it and the property that is being appraised. The appraiser must make appropriate adjustments for location, terms and conditions of sale, date of sale, and the physical characteristics of the properties. The proper selection of comparable properties minimizes both the need for, and the size of, any price adjustments. Requirements for properties in established subdivisions, units in established Planned Unit Developments (PUDs) or units in Established Condominium Projects For properties located in established subdivisions, units in established PUDs or units in Established Condominium Projects, the appraiser should use comparable sales from within the subject subdivision or project. Requirements for properties in new subdivisions, units in new PUDs or units in recently converted or New Condominium Projects For properties located in new subdivisions, units in new PUDs or units in recently converted or New Condominium Projects, the appraiser must use comparable sales from within the subject subdivision or project as well as comparable sales in other subdivisions or projects to help demonstrate the marketability of new developments or recently converted projects and the market value of the property. The appraiser must use: One comparable sale from inside the subject subdivision or project One comparable sale from outside the subject subdivision or project, and One comparable sale from inside or outside the subject subdivision or project If there are no settled or closed comparable sales from inside the subject subdivision or project, contract sales (pending sales) from inside the subject subdivision or project are acceptable, as long as three comparable sales are actual settled or closed sales. The comparable sale from inside the subject subdivision or project can be a sale by the builder or developer of the subject property. Comparable sales that are resales from within the subject subdivision or project are preferable to comparable sales from outside the subdivision or project provided the builder or developer of the subject property is not involved in the sale transaction. At a minimum, at least two comparable Page 3 of 3
must be outside the influence of the builder or developer of the subject property. Additional Requirements for Condominium Units The appraiser must report the project name, the assessments, including special assessments and the property rights for each comparable sale and must compare them to the subject project. The appraiser must also identify the common elements including the amenities available to the unit owners, comment on their condition and analyze how they compare to the common elements and amenities of competing projects. Comparable sales must be from condominium projects in the same market, be similar to the subject project and compete for the same purchasers. Additional Requirements for Units in Detached Condominium Projects The appraiser must use similar detached condominium comparable sales from the same project or from similar detached condominium projects in the same market area. The appraiser may use detached comparable sales that are not located in a condominium project only if the appraiser supports the use of such sales in the appraisal report and reflects any effect that the condominium form of ownership has on the market value and marketability of the subject property. Additional Requirements for - to -Unit Properties In addition to the other requirements and guidelines set forth in this section, the following requirements and guidelines are applicable to completing Form 7, Small Residential Income Property Appraisal Report, for - to -unit properties. Comparable Rent Data for - to -unit Properties At least three rental comparables must be analyzed in the "comparable rental data" section. These rental comparables must: Have current rental information Be units similar to and located near the subject property The rental comparables are usually not the same comparable properties used in the sales comparison approach. The appraisal report should state that the units and properties selected as rental comparables are comparable to the subject property (both the units and the overall property) and should accurately represent the rental market for the subject property unless otherwise stated in the report. The lender should be aware that there are varying conditions that characterize different types of locations. Conditions that are typical of certain locations may not be present in other locales. This does not mean that the conditions are unacceptable, rather that they must be viewed in context with the nature of the area in which the mortgaged premises is located. For example: When the mortgaged premises is located in a suburban or urban area, the appraiser would most likely use comparable sales in the immediate vicinity of the property since suburban and urban areas are usually more densely developed and comparable sales are typically available in the subject neighborhood. Rural areas often have less real estate sales activity than more populated locations. Property sales in rural locations often involve a variety of property types, and may have relatively large parcels as compared to other locations. Given the potential challenges with appraising properties in these market areas, the appraiser must be knowledgeable about the varying conditions that characterize properties in a particular geographic area. In such cases, appraisers may have to use older comparable sales, comparable sales that are located a considerable distance from the subject property or comparable sales that are not similar to the subject property. The appraiser must justify and support such use in the appraisal report. Mortgages secured by non-traditional types of properties are eligible for delivery to Freddie Mac. The appraiser may use traditional homes as comparable sales for unique properties as long as the appraiser determines and adjusts for any differences between the subject property and the comparable sales and sales must be outside the influence of the builder or developer of the subject property. Additional Requirements for Condominium Units The appraiser must report the project name, the assessments, including special assessments and the property rights for each comparable sale and must compare them to the subject project. The appraiser must also identify the common elements including the amenities available to the unit owners, comment on their condition and analyze how they compare to the common elements and amenities of competing projects. Comparable sales must be from condominium projects in the same market, be similar to the subject project and compete for the same purchasers. Additional Requirements for Units in Detached Condominium Projects The appraiser must use similar detached condominium comparable sales from the same project or from similar detached condominium projects in the same market area. The appraiser may use detached comparable sales that are not located in a condominium project only if the appraiser supports the use of such sales in the appraisal report and reflects any effect that the condominium form of ownership has on the market value and marketability of the subject property. Additional Requirements for - to -Unit Properties In addition to the other requirements and guidelines set forth in this section, the following requirements and guidelines are applicable to completing Form 7, Small Residential Income Property Appraisal Report, for - to -unit properties. Comparable Rent Data for - to -unit Properties At least three rental comparables must be analyzed in the "comparable rental data" section. These rental comparables must: Have current rental information Be units similar to and located near the subject property The rental comparables are usually not the same comparable properties used in the sales comparison approach. The appraisal report should state that the units and properties selected as rental comparables are comparable to the subject property (both the units and the overall property) and should accurately represent the rental market for the subject property unless otherwise stated in the report. Requirements for a 1-Unit Property with an Accessory Unit (Legal or Legal Non-Conforming Zoning Compliance) The appraiser must include at least one comparable sale with only one accessory unit. The accessory unit of the comparable sale must also comply with the zoning and land use requirements to demonstrate the conformity and marketability of the subject property to its market area. Requirements for a 1-Unit Property with an Accessory Unit (Illegal Zoning Compliance) The appraiser must include at least two comparable sales with each having only one accessory unit. The accessory unit of each comparable sale must also be non-compliant with the zoning and land use requirements to demonstrate the conformity and marketability of the subject property to its market area. The lender should be aware that there are varying conditions that characterize different types of locations. Conditions that are typical of certain locations may not be present in other locales. This does not mean that the conditions are unacceptable, rather that they must be viewed in context with the nature of the area in which the mortgaged premises is located. For example: When the mortgaged premises is located in a suburban or urban area, the appraiser would most likely use comparable sales in the immediate vicinity of the property since suburban and urban areas are usually more densely developed and comparable sales are typically available in the Page of 3
can justify and support the use of the comparable sales in the appraisal report. Occasionally, there may be no similar or truly comparable sales for a particular property because of the uniqueness of the property or other conditions. In such cases, the appraiser must use his or her knowledge and judgment to select comparable sales that represent the best indicators of value for the subject property to reflect the actions of typical purchasers in the market. In addition, comparable sales may be taken from a competing neighborhood if: The appraiser has established that the neighborhoods are comparable and compete for the same buyers, and Comparable sales taken from the competing neighborhood are better indicators of current market trends in the subject neighborhood than the existing comparable sales available in the subject neighborhood. subject neighborhood. Rural areas often have less real estate sales activity than more populated locations. Property sales in rural locations often involve a variety of property types, and may have relatively large parcels as compared to other locations. Given the potential challenges with appraising properties in these market areas, the appraiser must be knowledgeable about the varying conditions that characterize properties in a particular geographic area. In such cases, appraisers may have to use older comparable sales, comparable sales that are located a considerable distance from the subject property or comparable sales that are not similar to the subject property. The appraiser must justify and support such use in the appraisal report. Mortgages secured by non-traditional types of properties are eligible for delivery to Freddie Mac. The appraiser may use traditional homes as comparable sales for unique properties as long as the appraiser determines and adjusts for any differences between the subject property and the comparable sales and can justify and support the use of the comparable sales in the appraisal report. Occasionally, there may be no similar or truly comparable sales for a particular property because of the uniqueness of the property or other conditions. In such cases, the appraiser must use his or her knowledge and judgment to select comparable sales that represent the best indicators of value for the subject property to reflect the actions of typical purchasers in the market. In addition, comparable sales may be taken from a competing neighborhood if: The appraiser has established that the neighborhoods are comparable and compete for the same buyers, and Comparable sales taken from the competing neighborhood are better indicators of current market trends in the subject neighborhood than the existing comparable sales available in the subject neighborhood. Section.01 Agency Loan Programs-Guideline Appraisal Requirements / General Property Eligibility Requirements Freddie Mac will purchase eligible mortgages secured by residential properties in urban, suburban and rural market areas as long as the mortgaged premises is adequate collateral for the mortgage transaction based on the value, condition and marketability of the property. The mortgaged premises must: Be primarily residential in nature based on the characteristics of the property and neighboring market area Be an attached or detached dwelling unit(s) located on an individual lot, in a Planned Unit Development or in a Condominium Project. Be safe, sound and structurally secure Be complete unless the requirements outlined in the Postponed Improvements subtopic are met Represent the highest and best use of the property as improved (or as proposed per plans and specifications) Have a legal or legal non-conforming use Have legal access (ingress and egress) Be suitable for year-round occupancy regardless of the location Have utilities that meet community standards Section.01 Agency Loan Programs-Guideline Appraisal Requirements / General Property Eligibility Requirements Freddie Mac will purchase eligible mortgages secured by residential properties in urban, suburban and rural market areas as long as the mortgaged premises is adequate collateral for the mortgage transaction based on the value, condition and marketability of the property. The mortgaged premises must: Be primarily residential in nature based on the characteristics of the property and neighboring market area Be an attached or detached dwelling unit(s) located on an individual lot, in a Planned Unit Development (PUD) or in a Condominium Project. Be safe, sound and structurally secure Be complete unless the requirements outlined in the Postponed Improvements subtopic are met Represent the highest and best use of the property as improved (or as proposed per plans and specifications) Have an eligible zoning compliance Have legal access (ingress and egress) Be suitable for year-round occupancy regardless of the location Have utilities that meet community standards Have mechanical systems that meet community standards Page 5 of 3
Have mechanical systems that meet community standards Have property insurance coverage that meets the requirements and coverage for hazards specific to the location of the property Not be subject to a pending legal proceeding for condemnation in whole or in part Have property insurance coverage that meets the requirements and coverage for hazards specific to the location of the property Not be subject to a pending legal proceeding for condemnation in whole or in part Boarder Income Correspondent Section.01 Agency Loan Programs- Guideline Standard Agency Agency Plus Home Possible Mortgage Income / Boarder Income Follow LPA requirements, which are as follows. The requirements apply for streamlined accept and standard documentation. Rental income generated from a borrower's 1-unit primary residence may be used to qualify a borrower with a disability if the rental income is from a live-in aide. Typically, a live-in aide will receive room and board payments through Medicaid waiver funds from which rental payments are made to the borrower. This income source may be considered stable monthly income if: The borrower has received rental payments from a live-in aide for the past 1 months on a regular basis, and The live-in aide plans to continue to reside with the borrower for the foreseeable future The rental income may be considered in an amount up to 30% of the total gross income that is used to qualify the borrower for the mortgage. Rental income generated from the borrower's second home or 1-unit primary residence other than as provided for above is not considered stable monthly income and may not be used to qualify the borrower. Income / Boarder Income See Rental Income from the Borrower's 1-unit Primary Residence in the Rental Income subtopic subsequently outlined in this document for guidance. Form 998, Operating Income Statement / Form 1000, Single Family Comparable Rent Schedule Correspondent Section 1.07 Appraisal Guidelines & Correspondent Section.01 Agency Loan Programs- Guideline Standard Agency (non-aus, DU & LPA) Agency Plus (DU & LPA) Fannie Mae DU Refi Plus Section 1.07 Appraisal Guidelines Overview / Guideline Summary Note: Below is an EXCERPT only of the guidelines outlined in the above referenced section. All other currently published guidelines remain the same. All conventional and supplemental appraisal reports must meet Appraiser Independence Requirements. Note: Supplemental appraisal reports include: 100D/ Appraisal Update and/or Completion Report 1007/100 Single Family Comparable Rent Schedule 16/998 Operating Income Statement HUD 9051 Compliance Inspection Report Section 1.07 Appraisal Guidelines Overview / Guideline Summary Note: Below is an EXCERPT only of the guidelines outlined in the above referenced section. All other currently published guidelines remain the same. All conventional and supplemental appraisal reports must meet Appraiser Independence Requirements. Note: Supplemental appraisal reports include: 100D/ Appraisal Update and/or Completion Report 1007/1000 Single Family Comparable Rent Schedule 16/998 Operating Income Statement HUD 9051 Compliance Inspection Report Section 1.07 Appraisal Guidelines Appraisal Reports and Exhibits Operating Income Statement (Fannie Mae Form 16/Freddie Mac Form 98) AND Single-Family Comparable Rent Schedule (Fannie Mae Form 1007) An Operating Income Statement (Fannie Mae Form 16/Freddie Mac Form 98) is required for investment property, including a - unit in which the borrower occupies one unit as a principal residence, regardless of whether the income is being used to qualify. The form may be prepared by the borrower or appraiser, provided the following: When the borrower prepares the Operating Income Statement, the appraiser s comments on the reasonableness of the projected operating income must be included on the form. Page 6 of 3 Section 1.07 Appraisal Guidelines Appraisal Reports and Exhibits Single-Family Comparable Rent Schedule (Fannie Mae Form 1007/Freddie Mac Form 1000) Agency Loan Programs Non-AUS A Single-Family Comparable Rent Schedule (Fannie Mae Form 1007) is required if the property is a oneunit investment property and the borrower is using rental income to qualify. Otherwise, Form 1007 is not required. (The lender may obtain this form for the purpose of reporting gross monthly rent at delivery.)
When the appraiser prepares the Operating Income Statement, the borrower must supply the necessary expense related statements (mortgage insurance premiums, HOA dues, leasehold payments, any subordinate financing payments, and any other pertinent information related to the property) for the appraiser. A Single-Family Comparable Rent Schedule (Fannie Mae Form 1007) is required if the property is a singlefamily investment property. The lender must ensure that the appraiser has operating statements; expense statements related to mortgage insurance premiums, homeowner s association dues, leasehold payments, or subordinate financing payments; and any other pertinent information related to the property. Fannie Mae DU Follow DU requirements, which are the same as non-aus guidelines. A Single-Family Comparable Rent Schedule (Freddie Mac Form 1000) is required if the property is a one-unit investment property and the borrower is using rental income to qualify. Otherwise, Form 1000 is not required. (If there is no active lease for a unit, or the borrower rents the unit to a family member, the lender may use Form 1000 for the purpose of reporting gross monthly rent at delivery.) Non-Agency Loan Programs An Operating Income Statement (Fannie Mae Form 16/Freddie Mac Form 98) is required for investment property, including a - unit in which the borrower occupies one unit as a principal residence, regardless of whether the income is being used to qualify. The form may be prepared by the borrower or appraiser, provided the following: When the borrower prepares the Operating Income Statement, the appraiser s comments on the reasonableness of the projected operating income must be included on the form. When the appraiser prepares the Operating Income Statement, the borrower must supply the necessary expense related statements (mortgage insurance premiums, HOA dues, leasehold payments, any subordinate financing payments, and any other pertinent information related to the property) for the appraiser. A Single-Family Comparable Rent Schedule (Fannie Mae Form 1007) is required if the property is a singlefamily investment property. The lender must ensure that the appraiser has operating statements; expense statements related to mortgage insurance premiums, homeowner s association dues, leasehold payments, or subordinate financing payments; and any other pertinent information related to the property. Section.01 Agency Loan Programs-Guideline Appraisal Requirements Fannie Mae Form 16/Freddie Mac Form 998 (Operating Income Statement) The following table shows information on the Fannie Mae Form 16/Freddie Mac Form 998 (Operating Income Statement). Section.01 Agency Loan Programs-Guideline Appraisal Requirements Fannie Mae Form 16/Freddie Mac Form 998 (Operating Income Statement) Note: The above referenced subtopic is being removed in its entirety. Both forms have been retired by the GSEs. Non-AUS An Operating Income Statement is required for investment property, including a - unit in which the borrower occupies one unit as a principal residence, regardless of whether the income is being used to qualify. The form may be prepared by the borrower or appraiser, provided the following: When the borrower prepares the Operating Income Statement, the appraiser s comments on the reasonableness of the projected operating income must be included on the form. When the appraiser prepares the Operating Income Statement, the borrower must supply the necessary expense related statements (mortgage insurance premiums, HOA dues, leasehold payments, any subordinate financing payments, and any other pertinent information related to the property) for the appraiser. Lenders must report the gross monthly rent at delivery for each non-owner occupied unit in - unit primary Page 7 of 3
residence and for each unit in a 1- unit investment property even when the borrower is NOT utilizing rental income to qualify. Lenders have the option of obtaining an Operating Income Statement (Fannie Mae Form 16/Freddie Mac Form 998) to meet this requirement. Reference: See the Primary Residences and Investment Properties subtopics previously presented in the Occupancy/Property Types topic for additional information regarding gross monthly rent documentation requirements when rental income is NOT being used for qualification. Fannie Mae DU For - unit primary residences and 1- unit investment properties, Form 16 is NOT required. However, since lenders must report the gross monthly rent at delivery for each non-owner occupied unit in - unit primary residence and for each unit in a 1- unit investment property even when the borrower is NOT utilizing rental income to qualify, lenders have the option of obtaining an Operating Income Statement (Fannie Mae Form 16) to meet this requirement. Reference: See the Primary Residences and Investment Properties subtopics previously presented in the Occupancy/Property Types topic for additional information regarding gross monthly rent documentation requirements when rental income is NOT being used for qualification. Freddie Mac LP Non-AUS guidelines apply. Section.01 Agency Loan Programs-Guideline Appraisal Requirements Fannie Mae Form 1007(Single Family Comparable Rent Schedule) Section.01 Agency Loan Programs-Guideline Appraisal Requirements Fannie Mae Form 1007 / Freddie Mac Form 1000 (Single Family Comparable Rent Schedule) Non-AUS This form is used on one-unit investment properties. It is not required if rental income on the subject property is not used to qualify the borrower. However, since lenders must report the gross monthly rent at delivery even when the borrower is NOT utilizing rental income to qualify, lenders have the option of obtaining a Single Family Comparable Rent Schedule (Fannie Mae Form 1007) to meet this requirement. Reference: See the Agency loan programs specific guidance outlined in the Single-Family Comparable Rent Schedule (Fannie Mae Form 1007/Freddie Mac Form 1000) subtopic in the Appraisal Reports and Exhibits topic within Section 1.07: Appraisal Guidelines for guidance. Reference: See the Primary Residences and Investment Properties subtopics previously presented in the Occupancy/Property Types topic for additional information regarding gross monthly rent documentation requirements when rental income is NOT being used for qualification. Fannie Mae DU Non-AUS guidelines apply. Freddie Mac LP The Single-Family Comparable Rent Schedule is not required for a LP transaction. Page 8 of 3
Investment Properties Correspondent Section.01 Agency Loan Programs- Guideline Standard Agency Agency Plus Loan Terms / Agency Maximum LTV/TLTV/HTLTV Ratio Requirements Purpose Purchase 1 3 Agency Investment Property 3/1, 5/1, 7/1, and 10/1 LIBOR ARMs Terms 10-30 Years for 3/1, 5/1, and 7/1 ARMs; 15-30 Years for 10/1 ARMs # of LTV/TLTV/HTLTV LTV/TLTV/HTLTV LTV/TLTV/HTLTV for LPA Units for Non-AUS Loans for DU Loans Loans 1, Loan Terms / Agency Maximum LTV/TLTV/HTLTV Ratio Requirements Agency Investment Property 3/1, 5/1, 7/1, and 10/1 LIBOR ARMs Terms 10-30 Years for 3/1, 5/1, and 7/1 ARMs; 15-30 Years for 10/1 ARMs Purpose # of Units LTV/TLTV/HTLTV for Non-AUS Loans LTV/TLTV/HTLTV for DU Loans LTV/TLTV/HTLTV for LPA Loans 1, Purchase 1 3 Limited Cash-Out Refinance (Rate/ Term) Cash-Out Refinance 1 3 1 3 Limited Cash-Out Refinance (Rate/ Term) Cash-Out Refinance 1 3 1 3 1. 5/1 ARMs with 5//5 caps are not eligible for LPA loans. If borrower owns more than one investment property, the loan is not eligible for financing as an Agency 3/1 or 5/1 ARM. 1. 5/1 ARMs with 5//5 caps are not eligible for LPA loans. If borrower owns more than one financed investment property, the loan is not eligible for financing as an Agency 3/1 or 5/1 ARM. Loan Terms / Agency Plus Maximum LTV/TLTV/HTLTV Ratio Requirements Purpose # of Units Purchase 1 3 Limited 1 Cash-Out Refinance 3 (Rate/ Term) Cash-Out Refinance 1 3 Agency Plus Investment Property - 5/1, 7/1 & 10/1 LIBOR ARMs Terms 10-30 Years for 5/1 and 7/1 ARMs; 15-30 Years for 10/1 ARMs LTV/TLTV/HTLTV LTV/TLTV/HTLTV for Non-AUS Loans for DU Loans LTV/TLTV/HTLTV for LPA Loans 1, 1 5/1 ARMs with 5//5 caps are not eligible for LPA loans. If the borrower owns more than one investment property, the loan is not eligible for financing as a 5/1 ARM. Loan Terms / Agency Plus Maximum LTV/TLTV/HTLTV Ratio Requirements Purpose # of Units Purchase 1 3 Limited 1 Cash-Out Refinance 3 (Rate/ Term) Cash-Out Refinance 1 3 Agency Plus Investment Property - 5/1, 7/1 & 10/1 LIBOR ARMs Terms 10-30 Years for 5/1 and 7/1 ARMs; 15-30 Years for 10/1 ARMs LTV/TLTV/HTLTV LTV/TLTV/HTLTV for Non-AUS Loans for DU Loans LTV/TLTV/HTLTV for LPA Loans 1, 1 5/1 ARMs with 5//5 caps are not eligible for LPA loans. If the borrower owns more than one financed investment property, the loan is not eligible for financing as a 5/1 ARM. Page 9 of 3
Occupancy/Property Types Investment Properties Freddie Mac LP Follow LP requirements, which are noted below: For newly constructed homes that are purchase transactions, the borrower may not be affiliated with or related to the builder, developer or property seller. If the borrower owns more than one (1) investment property, the loan must be a fixed rate or 7/1 or 10/1 ARM (3/1 and 5/1 ARMs are not eligible). The lender must deliver the ULDD Data Point Property Dwelling Unit Eligible Rent Amount for each 1- unit investment property and each unit in a - to -unit investment property regardless of whether rental income from the subject investment property is being used to qualify the borrower. Enter the gross monthly rental income for each non-owner-occupied unit as indicated on the signed lease(s) for the mortgaged premises; or if there is no active lease for a unit, or the borrower rents the unit to a family member, enter the gross monthly rental income as estimated on the applicable appraisal report or addendum. Occupancy/Property Types Investment Properties For newly constructed homes that are purchase transactions, the borrower may not be affiliated with or related to the builder, developer, or property seller. If the borrower owns more than one financed investment property, the loan must be a fixed rate or 7/1 or 10/1 ARM (3/1 and 5/1 ARMs are not eligible). The monthly housing expense related to the borrower's current primary residence must be used in calculating the borrower's monthly housing expense-to-income ratio. Regardless of whether rental income from the mortgaged premises is used in qualifying, the reserves requirements outlined in the applicable first mortgage product description must be met. Gift funds, gifts of equity or grants are not permitted. Regardless of whether rental income from the subject investment property is being used to qualify the borrower, the lender must deliver the ULDD Data Point Property Dwelling Unit Eligible Rent Amount for the subject 1-unit investment property and each unit in a subject - to - unit investment property. Enter the gross monthly rental income for each unit as indicated on the signed lease(s) for the mortgaged premises. If there is no active lease for a unit, or the borrower rents the unit to a family member, enter the gross monthly rental income as estimated on the applicable appraisal report or addenda. Reference: See the Rental Income subtopic subsequently presented in this document for requirements related to rental income. Primary Residences Correspondent Section.01 Agency Loan Programs- Guideline Standard Agency Agency Plus Occupancy/Property Types Primary Residences Follow LPA requirements, which are noted below: Mortgaged premises purchased or refinanced by a borrower for an individual as described below will be considered to be a primary residence for all purposes, subject to the following provisions: The mortgage must comply with the provisions of one of the following: the borrower is the parent(s), conservator or guardian of an individual with a physical handicap or developmental disability or a person acting as attorney-in-fact pursuant to a power granted by the Individual and purchases or refinances the mortgaged premises as the primary residence for such individual. The individual may be unable to work or may have income that is not sufficient for him/her to qualify for a mortgage on his/her own. For purchase money transactions, the individual need not be an applicant for the mortgage loan and need not sign the note. For refinance transactions, at least one of the borrower(s) on the mortgage being refinanced, or a person legally authorized to act and sign on that borrower s behalf, must also be a borrower on the new refinance transaction secured by the subject property. Or, the borrower is the adult child (or children), conservator, or guardian of elderly individual(s) or person acting as attorney-in-fact pursuant to a power of attorney granted by the elderly individual(s) and purchases or refinances the mortgaged premises as the primary Occupancy/Property Types Primary Residences Mortgaged premises purchased or refinanced by a borrower for an individual as described below will be considered to be a primary residence for all purposes, subject to the following provisions: The mortgage must comply with the provisions of one of the following: the borrower is the parent(s), conservator or guardian of an individual with a physical handicap or developmental disability or a person acting as attorney-in-fact pursuant to a power granted by the Individual and purchases or refinances the mortgaged premises as the primary residence for such individual. The individual may be unable to work or may have income that is not sufficient for him/her to qualify for a mortgage on his/her own. For purchase money transactions, the individual need not be an applicant for the mortgage loan and need not sign the note. For refinance transactions, at least one of the borrower(s) on the mortgage being refinanced, or a person legally authorized to act and sign on that borrower s behalf, must also be a borrower on the new refinance transaction secured by the subject property. Or, the borrower is the adult child (or children), conservator, or guardian of elderly individual(s) or person acting as attorney-in-fact pursuant to a power of attorney granted by the elderly individual(s) and purchases or refinances the mortgaged premises as the primary residence for such elderly individual(s). The elderly individual(s) may be unable to work or may have income Page 10 of 3
residence for such elderly individual(s). The elderly individual(s) may be unable to work or may have income that is not sufficient for him/her to qualify for a mortgage on his/her own. For purchase money transactions, the elderly individual(s) need not be an applicant for the mortgage loan and need not sign the note. For refinance transactions, at least one of the borrower(s) on the mortgage being refinanced, or a person legally authorized to act and sign on that borrower s behalf, must also be a borrower on the new refinance transaction secured by the subject property. the mortgage must be secured by a 1 unit property, the mortgage must be included in the calculation of the number of financed properties that are owned by borrower, the borrower must not own more than one property that is considered a primary residence pursuant to the provisions of this section, and For SunTrust Internal Employees Only: Use SFC H3 to indicate primary residence purchased for child or parent. Regardless of whether rental income is used in qualifying the borrower, the ULDD Data Point Property Dwelling Unit Eligible Rent Amount for each non-owner occupied unit in a - to -unit primary residence must be delivered. Enter the gross monthly rental income for each non-owner-occupied unit as indicated on the signed lease(s) for the Mortgaged Premises; or if there is no active lease for a unit, or the borrower rents the unit to a family member, enter the gross monthly rental income as estimated on the applicable appraisal report or addendum. that is not sufficient for him/her to qualify for a mortgage on his/her own. For purchase money transactions, the elderly individual(s) need not be an applicant for the mortgage loan and need not sign the note. For refinance transactions, at least one of the borrower(s) on the mortgage being refinanced, or a person legally authorized to act and sign on that borrower s behalf, must also be a borrower on the new refinance transaction secured by the subject property. the mortgage must be secured by a 1 unit property, the mortgage must be included in the calculation of the number of financed properties that are owned by borrower, the borrower must not own more than one property that is considered a primary residence pursuant to the provisions of this section, and For SunTrust Internal Employees Only: Use SFC H3 to indicate primary residence purchased for child or parent. Regardless of whether rental income is used in qualifying the borrower, the ULDD Data Point Property Dwelling Unit Eligible Rent Amount for each non owner occupied unit in a to unit primary residence must be delivered. Enter the gross monthly rental income for each non owner occupied unit as indicated on the signed lease(s) for the mortgaged premises. If there is no active lease for a unit, or the borrower rents the unit to a family member, enter the gross monthly rental income as estimated on the applicable appraisal report or addenda. Qualifying Ratios Correspondent Section.01 Agency Loan Programs- Guideline Standard Agency Agency Plus Home Possible Mortgage Liabilities and Qualifying Ratios Qualifying Ratios Monthly housing expense-to-income ratio The monthly housing expense is the sum of the following monthly charges on the borrower's primary residence: Principal and interest payments on the mortgage Property hazard insurance premiums Real estate taxes When applicable: Mortgage insurance premiums Leasehold payments Homeowners association dues (excluding unit utility charges) Payments on secondary financing Liabilities and Qualifying Ratios Qualifying Ratios Monthly housing expense-to-income ratio The monthly housing expense is the sum of the following monthly charges on the borrower's primary residence: Principal and interest payments on the mortgage Property hazard insurance premiums Real estate taxes When applicable: Mortgage insurance premiums Leasehold payments Homeowners association dues (excluding unit utility charges) Payments on secondary financing Monthly debt payment-to-income ratio The monthly debt payment is the sum of the monthly charges for the following liabilities: Monthly housing expense Payments on all installment debts with more than 10 months of payments remaining, including debts that are in a period of either deferment or forbearance. Alimony, child support or maintenance payments with more than 10 months of payments remaining Monthly payments on revolving or open-end accounts (regardless of the balance). Monthly lease payments, regardless of the number of payments remaining, with the exception of Page 11 of 3 Monthly debt payment-to-income ratio The monthly debt payment is the sum of the monthly charges for the following liabilities: Monthly housing expense Payments on all installment debts with more than 10 months of payments remaining, including debts that are in a period of either deferment or forbearance. Alimony, child support or maintenance payments with more than 10 months of payments remaining Monthly payments on revolving or open-end accounts (regardless of the balance). Monthly lease payments, regardless of the number of payments remaining, with the exception of