Conventional Documentation Checklist for Loan Prospector
The Conventional Documentation Checklist for Loan Prospector feedback messages focus on the Documentation Checklist to guide the underwriting analysis. These messages appear on the Documentation Checklist section.
Updated: February 2013
Code
Conventional Documentation Checklist
2C
Rental Income: Borrower must demonstrate at least a two-year landlord history regardless if rental income yields a positive or negative cash flow if rental income is used to qualify.
2H
Junior Lien Payoff: Documentation is required to evidence that any junior lien paid off from the proceeds of a ‘no cash out’ refinance must have been used in its entirety to acquire the subject property.
2W
Rental Income: Provide evidence of rent loss insurance coverage in an amount equal to the gross monthly rent for at least six months if rental income from the subject property is used to qualify.
3J
Investment Property: Gift funds are not allowed.
3W
Asset Account: For any asset account that was opened within 90 days of verification, reflects large deposits or has a balance that is significantly greater than the previously shown balance, the Seller must include reliable documentation that source of the funds meets Freddie Mac's requirements.
3Z
Sale of Assets: Obtain bill of sale and proof of proceeds or documentation of the existence and Borrower ownership of the asset (e.g. car title), documentation of the value of the asset by a third party (e.g. blue book or appraisal), and documentation that a buyer exists at the specified price (e.g. letter of intent or contract) are required if non-real estate or non-security asset will be sold for funds to close.
4N
Secondary Financing: All terms of the secondary financing must be disclosed on the loan app. (or provide a copy of the executed Note), the payments must be included in the monthly housing expense, and file must contain evidence of subordination (e.g. a copy of the executed Subordination Agreement). If not on the credit report, the unpaid principal balance and payment amount must be documented with a recent statement, coupon, or other appropriate documentation.
4W
Alimony/Child Support/Separate Maintenance Payments: If using alimony, child support or separate maintenance payments to qualify, obtain copy of signed court order documenting payor’s obligation to Borrower for previous six months and evidence payor is obligated to make payments to Borrower for the next three years. File must contain proof of consistent receipt for total court ordered amount for most recent six months.
4Y
Contingent Liabilities: To exclude payment on a contingent liability from the monthly debts, obtain evidence that all payments have been made on time by someone other than the Borrower for the most recent 12 months, and document who makes the payments by obtaining copies of canceled checks or a statement from the lender.
5B
Employment Gaps: if applicable, document on the Uniform Residential Loan Application any employment gaps greater than 60 days and provide an explanation from the borrower in the mortgage file.
5D
Signed Individual Tax Returns: If any borrower is self-employed, most recent 2 years complete with business federal tax returns, third party verification of business within 30 days prior to Note Date, and Form 91 or comparable form required. If not using self-employed income to qualify, obtain individual federal tax returns to review for possible business loss and determine the effect any possible business loss has on the qualifying income.
5E
Mortgage Verification: Direct verification of mortgage payment history is required for any mortgages not verified on the LP credit reports. The Mortgage is ineligible for sale to Freddie Mac if the direct verification reveals more than 1X30 or any 60-day or more delinquencies in the last 12 months.
5F
Mortgage Verification: Direct verification of payment history is required for mortgages not verified on credit report.
5H
Monthly Debt-Payment-Ratio > 50%: Provide evidence that the borrower has been carrying an equivalent debt payment-to income ratio for at least one year while maintaining an acceptable credit reputation.
5P
Secondary Financing: All terms of the secondary financing must be disclosed on the loan application (or provide a copy of the executed Note), the payments must be included in the monthly housing expense, and the file must contain evidence of subordination (such as a copy of the executed Subordination Agreement).
5R
Secondary Financing: if not available on the credit report, the unpaid principal balance, payment amount, and payment history for the most recent 12 months must be documented in the mortgage file with a direct verification or a combination of cancelled checks and recent statement for coupon.
5S
Installment Account: If credit report does not show the required monthly payment for an installment account, the file must be documented with evidence of the required payment amount. Examples of acceptable documentation would include a copy of the payment coupon, a copy of the original contract or direct verification obtained from the creditor.
5T
Revolving or open-end accounts: Use 5% of the outstanding balance in the absence of a stated payment on the credit report or direct verification. Open-end accounts do not have to be included in the monthly debt payment if the Borrower has sufficient funds to pay off the outstanding account balance.
9N
Neighborhood Solution eligibility: Paystub, W-2, letter from the borrower's employer, Defense Department Form 214 (Form DD214), or other documentation that provides comparable information.
DX
Verify occupant borrower(s) has minimum 5% down payment, {5% of purchase price}, from his/her own funds.
KR
MAF: Form 465.
KS
MAF: Form 466.
KT
MAF: Form 70.
KU
MAF: Form 2055.
KV
MAF: Form 70B.
KX
If all Borrower(s) are First-Time Homebuyers, at least one qualifying Borrower must participate in a homeownership education program before the Note Date. Retain Homeownership Education Certificate or comparable document in the mortgage file.
KY
Landlord Education: Landlord education required. A Certificate of Achievement, or comparable document, must be maintained in the mortgage file.
MR
MAF: Form 2070 or Property Inspection Alternative
MU
Property Inspection Alternative: If loan is delivered with Form 2070 or Property Inspection Alternative, the borrower must sign Freddie Mac Form 1149 Notice about Appraisal on Your Property, or other substantially similar notice.
RX
Signed IRS Form 4506-T: Any borrower, whose income is used to qualify, must sign IRS Form 4506-T at application and on the Note Date.
SE
Signed Business Tax Returns: If self-employed, most recent 2 year complete individual and business tax returns for each business providing income to ~SlfEmpBorr~, third party verification within 30 days prior to the Note Date, and completed Form 91 or comparable form required. If not using self-employed income to qualify, then obtain tax returns to review possible business loss and determine the effect any possible business loss has on qualifying income.
SG
Depository, Stock and/or Bond Accounts: Obtain most recent 2 months statements for each account to verify sufficient funds for closing and for amount of reserves submitted to LP. Proof of liquidation of non-liquid accounts is required if assets are needed for closing.
SN
Down Payment: Verify occupant borrower(s) has minimum 5% down payment, $~PurPrice5%~, from his/her own funds.
SQ
Reserves: Regardless of whether rental income is used in qualifying the borrower, verify 6 months of reserves (PITI) for the subject property, $~PITI6Mths~.
SR
Reserves: Verify 6 months reserves, $~PITI6Mths~ for the subject property and 2 months reserves (PITI) for each other financed Second Home and/or 1- to 4-unit Investment Property that the borrower owns and/or is obligated on the Note.
SU
If the contingent liability is an assumed mortgage, obtain a copy of the documents transferring the property and the assumption agreement executed by the transferee in order to exclude the payment from the monthly debts. The payment on a secured debt or mortgage can also be excluded from the monthly debts if the obligation has been assigned to another by a court order; document the file with the court order and the transfer of title.
U8
Reserves: Verify 2 months reserves $~PITI2Mths~ for the subject property and 2 months reserves (PITI) for each other financed Second Home and/or 1-to 4-unit Investment Property that the borrower owns and/or is obligated on the Note.
UA
Bankruptcy within the last seven years: The mortgage file must contain:1)Copies of the bankruptcy petition, schedule of debts and discharge or dismissal 2)Evidence to indicate that all debts not satisfied by the bankruptcy have been paid or are being paid and 3)Any other evidence necessary to support the Seller's determination that the Borrower has reestablished and maintained an acceptable credit reputation.
UB
Bankruptcy appears on the application: The mortgage file must contain: 1)Copies of the bankruptcy petition, schedule of debts and discharge or dismissal 2)Evidence to indicate that all debts not satisfied by the bankruptcy have been paid or are being paid and 3)Any other evidence necessary to support the Seller's determination that the Borrower has reestablished and maintained an acceptable credit reputation.
UC
Foreclosure/Deed-in-Lieu of Foreclosure on the application: Provide evidence of the completion of the foreclosure/deed-in-lieu of foreclosure.
UD
Foreclosure within the last seven years: Provide evidence of the completion of the foreclosure.
UE
Short Sale/Deed-in-Lieu of Foreclosure within the last seven years: Provide evidence of the completion of the short sale/deed-in-lieu of foreclosure.
UF
Bankruptcy: If the bankruptcy occurred within the last seven years, the mortgage file must contain: 1)Copies of the bankruptcy petition, schedule of debts and discharge or dismissal 2)Evidence to indicate that all debts not satisfied by the bankruptcy have been paid or are being paid and 3)Any other evidence necessary to support the Seller's determination that the Borrower has reestablished and maintained an acceptable credit reputation.
W2
Signed Business Tax Returns: If self-employed, most recent 1 year complete individual and business tax returns for each business providing income to ~SlfEmpBorr~, third party verification within 30 days prior to the Note Date, and completed Form 91 or comparable form required. If not using self-employed income to qualify, then obtain tax returns to review possible business loss and determine the effect any possible business loss has on qualifying income.
WA
MAF: Form 72.
WM
Stable monthly income and asset qualification: For all income, including income topics such as retirement, long-term disability, temporary leave, public assistance, military reserves, mortgage differentials and assets as a basis for mortgage qualification, refer to the Freddie Mac Single-Family Seller/Servicer Guide, Chapter 37. The guidance includes income topics referenced within the existing LP messages as well as all other income topics.
WP
Depository, Stock and/or Bond Accounts: Obtain most recent statement(s) for each account to verify sufficient funds for closing and for amount of reserves submitted to LP. Proof of liquidation of non-liquid accounts is required if assets are needed for closing.
WQ
Retirement Statements: Obtain most recent 2 months statement. 70% of the vested amount minus any outstanding loans may be used as funds for closing and reserves submitted to LP. If the assets in the account are needed for closing, proof of liquidation must be provided in the mortgage file.
WR
Executed HUD-1: Or equivalent closing statement if sale of home. If relocation, executed buyout agreement and closing statement.
WT
Life Insurance: Most recent statements and proof of liquidation if assets required for closing.
WU
Gift Funds: List donor's name, address, phone #, relationship to borrower, subject property address and dollar amount of each gift in gift letter signed by donor.
WV
Gift Funds not Deposited: If the verifications provided in the mortgage file do not show evidence that the gift funds have been deposited in the borrower’s account, provide documentation of the transfer of funds from the donor to the borrower.
WX
Reserves: Verify all submitted to LP.
WZ
Income Documentation: Obtain most recent YTD paystub documenting 1 full month, W-2(s) from the most recent tax year, and a verbal VOE, using Form 90 or comparable form, dated no more than 10 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date; or, a written VOE for 12 full months and a verbal VOE dated no more than 10 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date for ~EmplBorr~
X2
Income Documentation: Obtain most recent YTD paystub documenting at least 30 days of income and W-2(s) from the most recent 2 years or a written VOE for 24 full months. Additionally, obtain a verbal VOE, using Form 90 or comparable form, dated no more than 10 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date.
X4
Additional Income: For Borrowers who receive income from commissions, document a two-year consecutive history of receipt of the income (i.e., signed complete individual federal tax returns, including Schedule A, for the most recent two-year period). Written VOE covering most recent two-year period, or most recent YTD paystub(s) covering at least 30 days of income and most recent two years W-2s. Income must be likely to continue for the next three years.
X6
Additional Income: For Borrowers who receive income from bonus, overtime, tips, and/or second or additional jobs, document that the Borrower has a two-year consecutive history of receipt of the income (i.e., written VOE covering the most recent two-year period or the most recent YTD paystub(s) covering at least 30 days of income and the most recent two years W-2s). The income must be likely to continue for the next three years.
X8
Other Income: For Borrowers who receive income from notes receivable, document Borrower has a one-year consecutive history of receipt of the income (i.e., copy of the note and proof of receipt of payments in accordance with the terms of the note for the most recent one-year period). The income must continue for the next three years.
XB
Other Income: For Borrowers who receive income from dividends and interest and/or capital gains, document a two-year history of receipt of the income (i.e., signed complete individual federal tax returns for the most recent two-year period including Schedules B and/or D as applicable) and sufficient assets remaining after closing to support continuance of the qualifying income for at least the next three years.
XF
For Relief Refi-Open Access, regardless of the Documentation Level returned, income and asset documentation requirements in Guide section B24.3(f) apply.
XN
Other Income: For Borrowers who receive income from dividends and interest, capital gains, or royalty payments, obtain a signed complete individual federal tax return for the most recent one-year period and evidence of sufficient assets remaining after closing to support the qualifying income for dividend/interest income and capital gains.
XQ
Commission Income: For Borrowers who receive income from commissions, obtain a YTD paystub, salary voucher or written verification documenting at least 30 days of income OR signed complete individual federal tax returns for the most recent one-year period. Additionally, obtain a verbal VOE dated no more than 10 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date.
XS
Other Income: For Borrowers who receive income from notes receivable, obtain copy of the note and proof of receipt of payments in accordance with the terms of the note for the most recent one-month period.
XU
Retirement Statements: Obtain most recent monthly statement. 70% of the vested amount minus any outstanding loans may be used as funds for closing and reserves submitted to LP.
XW
Signed Individual Tax Returns: If any borrower is self-employed, obtain most recent 1 year signed complete individual federal tax return, and third party verification of business dated within 30 calendar days prior to Note Date or after the Note Date but prior to the Delivery Date.
XZ
Alimony/Child Support/Separate Maintenance Payments: If using alimony, child support or separate maintenance payments to qualify, obtain a copy of the signed court order and evidence of receipt of the total court ordered amount for most recent 1 month.
Y9
Retirement Statements: Obtain most recent monthly statement. 70% of the vested amount minus any outstanding loans may be used as funds for closing and reserves submitted to LP. If the assets in the account are needed for closing, proof of liquidation must be provided in the mortgage file.
YB
Income documentation information: For all income types, including, but not limited to income types such as rental income, temporary leave, military and military reserves, mortgage differentials and assets as a basis for mortgage qualification, refer to the Freddie Mac Single-Family Seller/Servicer Guide, Section B24.3 (f)(i). The guidance includes income types referenced within the existing LP messages as well as all other income types.
YD
Depository, Stock and/or Bond Accounts: Obtain most recent monthly or quarterly statement for each account to verify sufficient funds for closing and for amount of reserves submitted to LP.
YF
Cash Value of Life Insurance: Most recent monthly or quarterly statement.
YH
Income Documentation: For Borrowers who receive income from primary or secondary employment, bonuses, overtime, tips or an automobile allowance, obtain most recent YTD paystub, salary voucher or written verification of employment documenting 1 month of income, and a verbal VOE dated no more than 10 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date.
YK
Other Income: If using retirement, survivor and dependent benefits, long-term disability, social security, public assistance, Section 8 assistance, foster care or supplemental security income to qualify, obtain a copy of the award letter, 1099 or other third-party documentation showing income type, source, and amount OR the most recent 1 month bank statement or other equivalent documentation evidencing receipt of the income.
ZF
MAF: Form 70 (Uniform Residential Appraisal Report), Form 72 (Small Residential Income Property Appraisal Report), or Form 465 (Individual Condominium Unit Appraisal Report), as applicable.
