Announcement 19-0031: Carrington Advantage Program Underwriting Guideline Updates

Overview

Carrington Mortgage Services, LLC (CMS) is pleased to announce the Carrington Advantage products (CFA, CFA Plus, and Investor Advantage) underwriting guidelines have been revised with the following changes (highlighted in red):

Carrington Flexible Advantage / Advantage Plus Guidelines

Old Requirements

Updated Requirements

Added new requirements for Texas Conversion (Refinance) Transactions

The state of Texas permits conversion of Texas Home Equity cash-out transactions to rate/term refinance transactions under Tex. Const. Art. 16 §50(f)(2).  Refer to Refinancing an Existing Home Equity Loan – Texas Conversion Transactions for detailed requirements to convert (refinance) a Texas 50(a)(6) loan to a non-home equity rate/term loan.

Cash-Out Refinance > Seasoning

For cash-out refinance transactions where the property is currently vested in a trust, the borrowers must have owned the property in the name of a trust for at least six (6) months prior to closing.

Cash-Out Refinance > Seasoning

For cash-out refinance transactions where the property is currently vested in a trust or LLC, the borrowers must have owned the property in the name of the trust or LLC for at least six (6) months prior to closing.

Note: Properties removed from a Trust/LLC are not required to meet the seasoning requirements if the property moves from the Trust to the owner of Trust or the LLC to the owner of LLC. Minimum fifty-percent (50%) ownership of the LLC is required.

Retirement Accounts

If the borrower intends to use the retirement account to also satisfy income requirements they must qualify at 60% of the retirement assets (70% for borrowers of retirement age that do not have a 10% withdrawal penalty), see also Proof of Continuance

Retirement Accounts

Retirement accounts must qualify at 60% of the retirement assets (70% for borrowers of retirement age that do not have a 10% withdrawal penalty), see also Proof of Continuance

 

Carrington Flexible Advantage / Advantage Plus Guidelines

Old Requirements

Updated Requirements

Ineligible Property Types

  • Manufactured Homes
  • Co-operative Units
  • Condotels or Condo Hotels
  • Leaseholds
  • Log Homes
  • Rural Properties
  • Farms or Hobby/Working Farms
  • Properties subject to Rent Control regulations
  • Unique Properties (Earth Homes, Berm Homes, Dome Homes, etc.)
  • Properties with oil, gas, or mineral rights
  • Builder Model Leaseback
  • Non-Conforming zoning regulations that prohibit rebuilding
  • State-approved medical marijuana producing properties

Ineligible Property Types

  • Manufactured Homes
  • Co-operative Units
  • Condotels or Condo Hotels
  • Leaseholds
  • Log Homes
  • Rural Properties
  • Farms or Hobby/Working Farms
  • Properties subject to Rent Control regulations
  • Unique Properties (Earth Homes, Berm Homes, Dome Homes, etc.)
  • Properties with active oil, gas, or mineral drilling, excavation, etc.
  • Builder Model Leaseback
  • Non-Conforming zoning regulations that prohibit rebuilding
  • State-approved medical marijuana producing properties

Added new requirements for Deferred Maintenance

CMS permits appraisals to be based on the “as is” condition of the property provided existing conditions are minor and do not affect the safety, soundness, or structural integrity of the property, and the appraiser’s opinion of value reflects the existence of these conditions.

Deferred maintenance is typically due to normal wear and tear from the aging process and the occupancy of the property. While such conditions generally do not rise to the level of a required repair, they must be reported. Examples of minor conditions and deferred maintenance include worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass.

 

Carrington Investor Advantage Guidelines

Old Requirements

Updated Requirements

Removed Fraud Report and Background Check requirements.

Added new requirements for Collections and Charge-Offs Paid through Closing Transaction

If collection or charge-off accounts are being paid off through our closing transaction, a payoff demand is not required. The amount reflected on the credit report or supplement can be used UNLESS:

·      The account is listed on the Title report

·      The reporting date on the credit report is older than 90 days

·      Underwriter discretion for layered risk

Example: The account is not recently rated, large balance owed and the borrower is short to close

All Flexible Advantage/ Advantage Plus (including Texas Home Equity) and Investor Advantage Matrices

Old Requirements

Updated Requirements

General Collateral Requirements

Property must be in average or better condition. C4 and Q4.  Deferred maintenance is allowed provided the neglected item is not structural in nature (as noted by the appraiser). Deferred items may be left “as is” if the aggregate cost to cure the deficiency does not exceed $2,000 or impact the safety or habitability of the property.

General Collateral Requirements

Property must be in average or better condition. Properties in C5 or C6 condition are not acceptable.

Deferred maintenance is allowed subject to the Deferred Maintenance requirements described above.

Eligible Sources of Assets

Acceptable sources of funds are bank deposits (checking/savings), marketable public traded securities (70% of account value), loans secured by borrower’s assets, sale of real estate, funds borrowed secured by real estate, trust funds (60% of borrower’s undistributed share), cash value/surrender value of life insurance (60% of the cash value), retirement accounts using 60% of available/vested balance (SEP-IRA, 401K), depleting the assets from the business account will not have a negative impact on the viability and cash flow of the business.

Eligible Sources of Assets

Acceptable sources of funds are bank deposits (checking/savings), marketable public traded securities (70% of account value), loans secured by borrower’s assets, sale of real estate, funds borrowed secured by real estate, trust funds (60% of borrower’s undistributed share), cash value/surrender value of life insurance (60% of the cash value), retirement accounts using 60% of available/vested balance (SEP-IRA, 401K), business assets provided borrower is 100% owner of the business, depleting the assets from the business account will not have a negative impact on the viability and cash flow of the business.

 

 

All Flexible Advantage/ Advantage Plus (including Texas Home Equity) and Investor Advantage Matrices

Old Requirements

Updated Requirements

Seller Contribution/Sale Concessions

Maximum seller contribution up to 6% for primary residence and second homes.  Investment Property = maximum 2%.

Sales concessions must be deducted from the sales price before calculating the LTV/CLTV.  Financing concessions are not allowed.

Seller Contribution/Sale Concessions

Maximum seller contribution up to 6% for primary residence and second homes.  Investment Property = maximum 2%.

Sales concessions exceeding the seller contribution limits must be deducted from the sales price before calculating the LTV/CLTV.  Financing concessions are not allowed.

Carrington Flexible Advantage Matrices

Old Requirements

Updated Requirements

Escrow Waivers

Not Permitted

Escrow Waivers

All States excluding DC: Not Permitted

DC loans: Property tax and/or insurance escrows may be waived if the LTV is 80% or lower.

First Time Investors

Not permitted

First Time Investors

Not permitted for non-owner occupied properties.

Carrington Investor Advantage Matrix

Old Requirements

Updated Requirements

Seller Contribution/Sale Concessions

Maximum seller contribution up to 2% toward closing.

Sales concessions must be deducted from the sales price before calculating the LTV/CLTV.  Financing concessions are not permitted.

Seller Contribution/Sale Concessions

Maximum seller contribution up to 2% toward closing.

Sales concessions exceeding the seller contribution limits must be deducted from the sales price before calculating the LTV/CLTV.  Financing concessions are not permitted.

Contacts

Please contact CorrespondentRM@carringtonms.com with any questions.

Carrington thanks you for your business.