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Freddie Mac -- LOAN PROSPECTOR |
0071 30 Year FRM
0077 15 Year FRM
0085 5/25 Balloon Mortgage
1237 7/23 Balloon Mortgage
Loan Prospector is an automated underwriting service that can provide the following:
The overall risk classification is a function of a credit risk and a collateral risk classification, if applicable. The risk classifications are as follows:
ACCEPT: Indicates that the borrower's credit reputation and capacity are acceptable. These loans have the lowest risk. No additional analysis is required to determine the investment quality of the loan. This means that you do not have to determine that the borrowers:
Freddie Mac will not require repurchase of the loan for credit or capacity reasons as long as you have correctly entered information and documented it appropriately.
ACCEPT PLUS: This is not a separate risk classification. It is an enhancement to the Accept classification and expedites mortgage underwriting for the highest quality loans. Loans eligible for Accept Plus will have significantly reduced underwriting and documentation requirements. In most cases, the Accept Plus documentation class allows you to use the borrower's stated income and stated debt. Accept Plus offers substantially expanded ratios and only required a verbal verification of employment for employed borrowers. Self employed borrowers can qualify for Accept Plus regardless of how long they have been self employed.
CAUTION: There is a strong indication that the loan contains excessive layering of risk and that the borrower's creditworthiness is unlikely. Freddie Mac's analysis indicates that the loan may not meet our standard of creditworthiness because the loan carries a substantial risk. This loans requires a thorough examination. Unless extenuating circumstances, or major offsetting factors not evaluated by LP exist to reduce the risk of the loan, a Caution classification should be viewed as a strong indication that the borrower does not show sufficient willingness and/or ability to repay the mortgage as agreed. The application needs full credit and collateral underwriting analysis to determine if the loan will qualify for sale according to the seller/servicer guide.
Fixed Rate
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Balloon Mortgage
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A signed and processed IRS Form 4506 or 9501 (California only) is required for all loans where income is derived from the tax returns prior to funding.
Available provided:
If the borrowers receive 100% of their income from sources other than employment or self employment, they are not eligible for the stated income option.
All assets that are input to LP must be verified.
| Condition | Verification Required |
|---|---|
| DOWN PAYMENT AND CLOSING COSTS | |
| LP Accept | No verification of funds is required for no cash out
refinances if closing costs, prepaids and principal curtailment is less
than 4% of the new loan amount.
Bank statements for the most recent two months. |
| LP Accept Plus | One bank statement from each depository or brokerage
account is required to verify funds for down payment and closings costs.
For large deposits, only an explanation is required. |
| SALE OF ASSETS | |
| LP Accept and Accept Plus | No proof of asset liquidation is required if the existence and value of the assets are proven, and the file contains evidence that a buyer exists. |
| NOTE: If the source of funds for closing is from the sale of real estate, a copy of the HUD 1 is always required, regardless of the risk classification. | |
| GIFT FUNDS | |
| LP Accept and Accept Plus | No proof of transfer is required for gift funds if sufficient funds are verified on deposit. |
| GIFT LETTERS | |
| LP Accept | Gift letters are not required if the borrower has made at least a 5% cash down payment and the donor's name, address, phone number, relationship and dollar amount of the gift are listed on the application. |
| LP Accept Plus | Gift letters are not required. Donor data must be captured. |
| NOTE: Network must warrant that the borrower has 5% of his/her own funds for the down payment on loans with an LTV ratio over 80%. | |
| RESERVE REQUIREMENT | |
| LP Accept | No reserves are required for 1 unit primary residences or
second homes or for loans less than 70% LTV.
All others require two months reserves. |
| LP Accept Plus | There is no reserve requirement. |
| LP Accept and Accept Plus | If rental income is used for a 2-4 unit owner occupied property, sufficient reserves to make regular and emergency repairs plus six months monthly housing expense must be verified. |
Not eligible.
A maximum of five borrowers can be evaluated by LP on each loan application.
Eligible.
Available provided:
Including a payment from the contingent mortgage debt in the ratios is not required if the contingent mortgage debt:
The file must contain a copy of the divorce decree or assumption agreement plus the deed showing the transfer of title out of the borrower's name.
LP provides an evaluation of a loan's risk. The Credit Evaluation service determines the creditworthiness of a loan by assessing the layering of risk for
The credit analysis is performed using information from the loan application, credit repositories, and other resources. It provides a credit risk classification that determines the level of underwriting required and defines associated representations and warranties. The documentation classification, which determines the documentation required to provide for a loan, is also provided as a result of the analysis. The Risk Comments and Repository Reason Code sections of the Feedback Certificate give additional information to assist in underwriting the loan.
If you receive an Accept or Accept Plus documentation classification from LP, Freddie Mac will assume the warrant that the borrower has an acceptable credit reputation. Monument is still required to verify the validity of the credit information used in making the decision is valid.
Generally, a minimum credit score is required as detailed below.
Property Credit Score 1 Unit 620 2 Units 640 3 - 4 Units 660
When there are two credit scores, the lowest score is utilized. When there are three credit scores the middle score is utilized.
The following loans are eligible:
Income used for LP loans must meet the same definition of stable income as stated in the FHLMC Seller/Servicer Guide.
One important benefit with Accept Plus is that you do not need to calculate the borrower's income. You may use the income that the borrower has stated on the application, although you will obtain minimal documentation to verify that the borrower is employed as stated.
There are three classifications for income with Accept Plus:
| Condition | Verification required |
|---|---|
| SALARIED/EMPLOYED BORROWERS | |
| LP Accept | VOE or current paystub (does not have to cover a full
month if YTD information is provided) AND
a verbal verification AND two
years W-2's.
W-2's are not required if ALL of the following are met:
|
| LP Accept Plus: | Verbal verification of employment OR One paystub (does not have to cover a full month) OR A fully executed VOE |
| SELF EMPLOYED BORROWERS | Borrowers who own 25% or more of a business or a borrower who is employed but receives more than 25% of his income from commissions or per job contract basis. |
| LP Accept | Two years personal federal tax
returns, including W-2's and all schedules AND
Business tax returns from the two most recent tax years.
No business returns are required if ALL of the following apply:
No balance sheet or year to date P & L is required. |
| LP Accept Plus | For self employed borrowers,
pages 1 & 2 of the previous two years federal tax returns AND
The borrower must sign an IRS form 4506 for the most recent two years
personal returns.
Business tax returns for the most recent year filed are required as follows:
|
| NON EMPLOYED BORROWERS | Income from interest, trust, rental, and or social security income. |
| LP Accept | Traditional documentation as indicated in the Seller/Servicer guide. |
| LP Accept Plus | Stated income may not be used. |
NOTE: No business tax returns are required if the self employed income is less than 5% of the combined gross income for all borrowers.
Purchases to 80% LTV
Available provided:
Cash Out to 65% LTV -- One Unit Property
Available provided:
Cash Out to 60% LTV -- Two Unit Property
Available provided:
Standard Mortgage Insurance
LTV Coverage 90.00 - 95.00% 30% 85.01 - 90.00% 25% 80.01 - 85.00% 12%
The Loan Prospector feedback certificate will indicate if Custom or Reduced Mortgage Insurance is available based on the following conditions.
Custom Mortgage Insurance is available provided:
LTV Coverage 90.00 - 95.00% 18% 85.01 - 90.00% 12%
Reduced Mortgage Insurance is available provided:
LTV Coverage 90.00 - 95.00% 25% 85.01 - 90.00% 17%
Eligible provided:
Must have been employed in the United States for the previous two years and have established a two year credit history in the United States. A credit history that indicates only recently opened accounts is not sufficient to establish a credit reputation. A shorter credit history is permissible, provided that the United States credit history can be supplemented with credit history from a foreign country.
Nonpermanent resident alien borrowers who maintain their funds outside the United States and deposit them in a United States financial institution prior to closing must provide evidence that the funds were transferred from a foreign country and that they owned the funds prior to the transfer.
Second homes with nonpermanent resident alien borrowers are not acceptable, unless the nonpermanent resident alien is coborrowing with a United States citizen or Lawful Permanent Resident Alien.
The following are not acceptable to meet the reserve requirements unless liquidated and appropriately documented:
Note rate.
An explanation is not required when the ratios exceed 28/36. Resubmission to LP is required if the total amount of monthly debt increases by more than $200 from the prior submission.
Fixed Rate Mortgages
FNMA/FHLMC Multistate Fixed Rate Note, Form # 3200, 12/83 or acceptable State Specific format.
Balloon Mortgages
FHLMC Multistate Balloon Fixed Rate Note - Single Family, Form #3290, 6/90 or acceptable State specific format.
FHLMC Multistate Balloon Note Addendum, Form #3292, 10/90.
FHLMC Multistate Balloon Rider, Form #3191, 10/90.
ACCEPT: Indicates that the borrower's credit reputation and capacity are acceptable. These loans have the lowest risk. No additional analysis is required to determine the investment quality of the loan. This means that you do not have to determine that the borrowers:
Freddie Mac will not require repurchase of the loan for credit or capacity reasons as long as you have correctly entered information and documented it appropriately.
ACCEPT PLUS: This is not a separate risk classification. It is an enhancement to the Accept classification and expedites mortgage underwriting for the highest quality loans. Loans eligible for Accept Plus will have significantly reduced underwriting and documentation requirements. In most cases, the Accept Plus documentation class allows you to use the borrower's stated income and stated debt. Accept Plus offers substantially expanded ratios and only required a verbal verification of employment for employed borrowers. Self employed borrowers can qualify for Accept Plus regardless of how long they have been self employed.
CAUTION: There is a strong indication that the loan contains excessive layering of risk and that the borrower's creditworthiness is unlikely. Freddie Mac's analysis indicates that the loan may not meet our standard of creditworthiness because the loan carries a substantial risk. This loans requires a thorough examination. Unless extenuating circumstances, or major offsetting factors not evaluated by LP exist to reduce the risk of the loan, a Caution classification should be viewed as a strong indication that the borrower does not show sufficient willingness and/or ability to repay the mortgage as agreed. The application needs full credit and collateral underwriting analysis to determine if the loan will qualify for sale according to the seller/servicer guide. NOTE: It is Network's policy not to originate these loans as "A" paper. They may be reviewed for "A-" or subprime by running the loan through Assetwise.
LP's RGE service assigns a risk grade to loans that either exceed Freddie Mac's loan limits or do not meet Freddie Mac's loan risk standards. As an optional feature within RGE, lenders may also request Loss Coverage Estimate from a selected rating agency to estimate loss coverage requirements. Monument is not currently offering this evaluation.
Certain streamlined refinances, Freddie Mac owned rate/term and no cash out/no ratio qualifier loans may require a manual downgrade to a lower credit risk class due to the mortgage payment history.