Compliance Calendar

This Announcement describes the following updates:

▪ Submission of the Audited Financial Statement, Form 1001, and Form 582: updating the Selling Guide to reflect changes in the process for submission of financial statements and reports

▪ Miscellaneous update:

o Maintaining Seller/Servicer Eligibility

View the list of impacted topics

Click the link to read the full notice.

Chapter 11:

Paragraph 11.2 – The Ratios

• Updated the PITI ratio guidelines to reflect 34%.

• Updated Section B (7) to insert language addressing co-signed student loans when factoring monthly debts into ratio calculations.

• Updated Section B (12) to indicate the expectation of a business paying debts from an applicant’s personal credit report should also be verifiable

within the businesses’ cash flow analysis and/or profit and loss statements.

Paragraph 11.3 Debt Ratio Waivers and Compensating Factors

• Updated to clarify no waivers are permitted to increase the PITI ratio above 34% for purchase transactions.

• Under paragraph (A), clarified the maximum PITI ratio for purchase transactions is 34%.

• Updated the list of compensating factors to include payment shock and energy efficiency.

• Clarified that the 680-score provision must be a validated credit score to be eligible for a debt ratio waiver.

• Removed the requirement for the debt ratio waiver underwriting analysis documentation to be signed when submitted to the Agency for review.

Click the link to read the full circular.

This Guide Bulletin announces:

• Income underwriting and documentation requirements

➢ Updates to income underwriting and documentation requirements related to:

• Calculation of income from fluctuating hourly employment

• Social Security retirement and Social Security disability income types

• Asset and income modeler

➢ An enhancement to automated income assessment with Loan Product Advisor® using employed income data for Closed Loans

• Internal Revenue Service (IRS) Form 8821

➢ IRS Form 8821 as an acceptable alternative to IRS Form 4506-C

• Additional Guide updates

➢ Further updates as described in the Additional Guide updates section of this Bulletin

The Selling Guide has been updated to include changes to the following:

▪ Rent-related credits: updating policies and guidelines pertaining to rent credit with an option to purchase and rent-back credit

▪ Miscellaneous updates:

o DU Validation Service – Asset Validation

o Income Calculator and enforcement relief of certain representations and warranties

o IRS tax transcripts

o Temporary interest rate buydowns

1. Purpose. The Department of Veterans Affairs (VA) remains steadfast in its commitment to assist borrowers retain their homes and avoid foreclosure. The purpose of this Circular is to provide clarification on the dates of implementation for the recently released guidance in VA Servicer Handbook, M26-4, Chapter 5 and Appendix F.

2. Background. Previous guidance did not directly reference the required implementation dates for the VA Home Retention Waterfall outlined in Appendix F. Additionally, allowing servicers to use revised Chapter 5, independent of Appendix F, has resulted in proposed Traditional Modifications with a significant increase in monthly payment, without confirming affordability with the borrower. The intent behind the VA Home Retention Waterfall and loss mitigation options is to reach an affordable payment.

3. Effective Date. This Circular is effective immediately.

4. VA Home Retention Waterfall and Available Loss Mitigation Options.

a. Loss Mitigation Options. Effective May 8, 2024, servicers may use the loss mitigation options outlined in revised Chapter 5, in conjunction with Appendix F. Servicers are to follow the VA Home Retention Waterfall in order, as outlined in Appendix F, while reviewing borrowers for loss mitigation options. In instances where the servicer arrives at a step in the waterfall they have not yet implemented, the servicer should follow the moratorium guidance outlined in Circular 26-24-12, until they are able to proceed to the next step outlined in Appendix F. For borrowers affected by Coronavirus Disease 2019 (COVID-19), servicers may use the COVID-19 home retention options, as described in paragraph 6 of Circular 26-24-12, until they have implemented Veterans Affairs Servicing Purchase (VASP) program.

b. VA Home Retention Waterfall. Not later than October 1, 2024, servicers are to follow the VA Home Retention Waterfall explained in Appendix F which utilizes loss mitigation options outlined in revised Chapter 5.

c. In Flight Workouts. Effective immediately, servicers are to discontinue offering the loss mitigation options outlined in previous versions of Chapter 5, including the VA Affordable Modification (VAAM) and Streamline modification. Servicers are able to honor those loss mitigation options offered or approved prior to the date of this Circular. New loss mitigation reviews should follow the instructions in paragraph 4.a. of this Circular.

5. Questions. Any questions regarding this Circular should be submitted via ServiceNow at https://www.benefits.va.gov/HO....

6. Rescission. This Circular is valid until October 1, 2024

1. Purpose. The Department of Veterans Affairs (VA) is publishing this Circular to help holders process assumption transactions that also involve secondary borrowing.

2. Background. Any VA-­guaranteed home loan (other than for repairs, alterations, or improvements) must be secured by a first lien on the collateral.2 Sometimes, an assumer of a VA-guaranteed loan will also need to obtain another lien to help finance the purchase. This is called secondary borrowing and is generally not prohibited by VA. But if the secondary loan is not processed correctly, it can jeopardize the VA-­guaranteed home loan’s first lien position. VA’s Lenders Handbook M26­7 does not specifically address how to process assumption transactions where the assumer is obtaining secondary borrowing simultaneously with the assumption of a
VA­-guaranteed home loan.

3. Secondary Borrowing on Assumption Transactions. Although VA does not prohibit an assumer (regardless of whether a Veteran) of a VA­-guaranteed loan from obtaining a junior lien in conjunction with an assumption, the holder processing the assumption is responsible for ensuring that all statutory and regulatory requirements are met, including those related to retaining the priority of the VA­-guaranteed loan. When processing the assumption of a VA-guaranteed loan, holders are expected to take the following steps to protect the VA­-guaranteed loan’s priority:

a. Lien position: the holder must take steps necessary to ensure the secondary borrowing is subordinate to the VA-­guaranteed loan (that is, the secondary borrowing must be in a junior lien position relative to the VA-­guaranteed loan). This might include, for example, obtaining a subordination agreement.
b. Documentation of the secondary borrowing: the holder of the VA-­guaranteed loan is to document in the assumption loan file the name of the secondary lender, the amount of the secondary borrowing, and the repayment terms of the secondary borrowing agreed to by the assumer.

c. Allowable purposes: proceeds of the secondary borrowing may be used to pay for allowable closing costs3 needed to close the assumption or for amounts due the seller at closing as part of the assumption transaction.

d. Cash back: assumer is not to receive cash back from the secondary borrowing.

e. Underwriting: the recurring monthly payment for any secondary borrowing must be considered when evaluating the assumer’s debts on VA Form 26­6393, Loan Analysis, and in automated underwriting feedback (as applicable).

f. Interest rate: the interest rate may exceed the rate on the VA-­guaranteed loan and may be negotiated between the assumer and the lender of the secondary borrowing.

g. Assumability: If the secondary borrowing is not assumable, the holder of the VA-guaranteed loan should counsel the assumer that this may restrict their ability to sell the property to another creditworthy assumer through an assumption in the future.

h. Grace period: the secondary borrowing is to include a reasonable grace period before a late charge is assessed and, in the event of default, before the secondary lender may commence foreclosure proceedings.

4. Questions. For questions or comments please submit a request through VA’s ServiceNow customer portal at https://yourit.va.gov/csm?id=r... 1­877­827­3702, between the hours of 8:00 AM and 6:00 PM Eastern time.

5. Effective Date. This policy is effective immediately.

6. Paperwork Reduction Act. The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. § 3501­3520) and assigned OMB control numbers 2900­0523, 2900­0515, and 2900­0909. In accordance with the Paperwork Reduction Act, VA may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

7. Rescission: This Circular is valid until rescinded.

Click the link to read the full VA Transmittal of Change.

Click the link to read the full Transmittal of Change.

TO: Freddie Mac Servicers

SUBJECT: SERVICING UPDATES

This Guide Bulletin announces:

• Disaster policy
  • Clarifications to Freddie Mac disaster policy and relief
• Retention of Loan Product Advisor^® Feedback Certificates
  • A clarification of file retention requirements for Transfers of Ownership and assumptions
• Co-Issue XChange^®
  • The addition of Co-Issue XChange to the Guide
• Principle balance corrections
  • New Servicer permissions for current Accounting Cycles – September 1, 2024
• ARM rate adjustments
  • Updates to language related to ARM rate adjustments

EFFECTIVE DATE

All of the changes announced in this Bulletin are effective immediately unless otherwise noted.

On July 9, 2024, the Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2024-13, Revisions to the 203(k) Rehabilitation Mortgage Insurance Program including updates to the 203(k) Consultant Requirements and Fees. This ML implements updates to the Section 203(k) program guidelines and is intended to reduce barriers to using the program.

To support the implementation of the updates announced in ML 2024-13, FHA will make the following system updates for forward mortgages in FHA Connection (FHAC):

• Increase the maximum total rehabilitation cost for Limited 203(k) from $35,000 to $75,000.

• Increase the allowable financed mortgage payment reserves from six months to 12 months for a Standard 203(k) loan.

o Add a Notice of Return (NOR) edit on insurance application to ensure the financed amount does not exceed 12 months of Principle, Interest, Taxes, and Insurance (PITI).

• Allow 203(k) Consultant fees to be financed for a Limited 203(k) loan.

• Extend the maximum rehabilitation period as follows:

o Limited 203(k): Nine months

o Standard 203(k):12 months

These system updates will be available in conjunction with the implementation of the ML 2024-13 for all FHA case numbers assigned on or after November 4, 2024. The FHAC Guide has been updated to reflect these changes and is available on the portal homepage.

For submissions through FHAC Business-to-Government (B2G), the data must be submitted for FHA case numbers assigned on or after November 4, 2024. The FHAC B2G submission requirements accommodate the new data fields. Refer to the B2G Interface webpage for technical requirements.

Purpose -This Dear Lender Letter (DLL) extends the COVID-19 Recovery Loss Mitigation Options.

Effective Date - This DLL is effective immediately.

Affected Programs - This guidance applies to the Section 184 and Section 184A programs. This DLL extends DLL 2023-04 and DLL 2023-09.

Extension of COVID-19 Loss Mitigation Options - The COVID-19 Recovery Options may be offered through, but no later than, February 28, 2025, and completed no later than March 31, 2025. Lenders are reminded that, for the COVID-19 Recovery Modifications, they must comply with the Government National Mortgage Association’s (Ginnie Mae) mortgage-backed securities requirement that loans must be 90 or more Days Delinquent before they can be bought out of a Ginnie Mae pool.