Loan Prospector May 12 Release
May 14, 2013
To provide you with greater purchase certainty that the loans you sell to Freddie Mac will meet our eligibility requirements, Loan Prospector® will be updated on May 12, 2013. This update is part of a series of enhancements to Loan Prospector that will help create more efficiencies in your loan manufacturing process and as a result provide more confidence that the loans you deliver to Freddie Mac will meet our purchase requirements.
The Loan Prospector May 12, 2013, release will include the following enhancements:
- Updating Loan Prospector to reflect revised qualification requirements for ARM products to align with the October 16, 2012, Single-Family Seller/Servicer Guide (Guide) Bulletin 2012-21.
- Updating when the excessive value feedback message will be returned for Home Value Explorer® (HVE®) results in Loan Prospector.
- Updating an existing income documentation feedback message to specify the applicable borrower name.
- Adding new feedback messages for Federal Housing Administration (FHA) loans to align with the January 31, 2013, FHA Mortgagee Letter 2013-05.
ARM Qualification Requirements Changes in Loan Prospector
Loan Prospector will be updated to reflect revised qualification requirements for ARM products with initial adjustment periods of five years or less. For these ARM types, the borrower must be qualified using the greater of the Note Rate plus two percentage points or the fully indexed rate. This requirement is effective for mortgages with settlement dates on or after July 1, 2013, as outlined in Guide Bulletin 2012-21 and will be implemented in Loan Prospector on July 14, 2013.
For mortgages with initial submissions to Loan Prospector:
- Prior to May 12, 2013, and resubmissions prior to July 14, 2013 – Loan Prospector will assess the loan and calculate the debt-to-income ratio based on the Seller-provided ARM qualifying rate and debt amount. This includes mortgages with initial submissions before May 12, 2013, that were subsequently resubmitted to Loan Prospector after May 12, 2013, but before July 14, 2013. You should enter the ARM qualifying rate and the correct borrower housing and total debt depending on the future settlement date of the loan (before or after July 1, 2013, when the new qualification requirements are effective).
- On or after May 12, 2013 and all submissions on or after July 14, 2013 – Loan Prospector will assess the loan and calculate the debt-to-income ratio based on the higher of either the Seller-provided ARM qualifying rate, the Note Rate plus two percentage points, or the fully indexed rate (the sum of the Seller-provided margin and index). Please note, this also applies to mortgages with initial submissions prior to May 12, 2013, that were subsequently resubmitted to Loan Prospector on or after July 14, 2013.
Remember all data submitted to Loan Prospector for the last Loan Prospector Feedback Certificate must be true, complete, and accurate.
Please Note: For 7/6-month, 7/1, 10/6-month and 10/1 ARMs, the requirements remain the same.
Also as part of the Loan Prospector May 12 release, the system will be updated to return the following new feedback message on all ARM products with initial adjustment periods of five years or less and initial submissions to Loan Prospector on or after May 12, 2013, and for all applicable submissions on or after July 14, 2013:
|Message Code||Feedback Message|
|LPN UK||The ARM Qualifying Rate used on this submission is ~X.YX%~ and is the higher of the customer provided ARM Qualifying Rate, Note Rate + 2% or fully indexed rate.|
Update When the Excessive Value Feedback Message is Returned for HVE Results in Loan Prospector
We recently enhanced HVE to provide greater accuracy and more reliable property valuations. The HVE enhancements should provide you with more confidence in the HVE results you receive in Loan Prospector.
As part of the Loan Prospector May 12 release, we are refining the HVE variance percentage that initiates the return of the excessive value feedback message to help you more easily identify potentially inflated appraisal values. The excessive value feedback message is currently returned if the HVE variance is greater than 20 percent. On and after May 12, 2013, the excessive value feedback message will no longer be returned at a 20 percent HVE variance. The excessive value feedback message will be dependent on a variance percentage, as well as the transaction type and the HVE Confidence Score. When you receive the following excessive value feedback message, please take the time to review your appraisal carefully.
|Message Code||Feedback Message|
|LPN Y6||Review for Accuracy: The Estimated Value of Property or Net Purchase Price submitted for this transaction may be excessive for the local market. The appraisal should be carefully reviewed for this transaction.|
If you receive the excessive value feedback message on a loan submission:
- Prior to May 12, 2013, and you resubmit the loan on or after May 12, 2013, there is a possibility the excessive value feedback message may not be returned in Loan Prospector.
- On or after May 12, 2013, you should follow the same process you do today when you receive this feedback message.
Please Note: The absence of the excessive value feedback message on a submission does not necessarily mean the appraised value is supported. You must determine that the collateral is acceptable for the transaction as indicated in Guide Chapter 44.
Going forward, we will continue to refine the HVE accuracy and variance percentages to provide increased reliability regarding possibly inflated property values. The adjustments to the HVE variance percentages will occur on an ongoing basis, so we recommend you pay close attention to the feedback messages you receive on the Loan Prospector Feedback Certificate.
Additional guidance relating to the excessive valuation message will be included in a future Guide Bulletin.
Update to an Existing Income Documentation Feedback Message
With this release, Loan Prospector will be updated to reflect a change to include the applicable borrower’s name in an existing income documentation feedback message. This change is consistent with other feedback message updates made in the Loan Prospector February 10, 2013 Release and also reflects the business requirements outlined in the December 14, 2012, Guide Bulletin 2012-28. Beginning May 12, 2013, you will receive the following revised feedback message when applicable, for all new submissions and resubmissions of conventional mortgages:
|Message Code||Feedback Message|
|DOC X1||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 for ~EmplBorr~.|
The corresponding WEB feedback message is also being added and will be displayed on the Loan Prospector Documentation Checklist.
Loan Prospector Updated with New FHA Feedback Messages
For you to continue assessing Federal Housing Administration (FHA) loans through Loan Prospector, we are updating Loan Prospector with new requirements and new feedback messages. These updates will align Loan Prospector with the changes outlined in the January 31, 2013, FHA Mortgagee Letter 2013-05 by providing guidance for underwriting loans when the borrower has a credit score below 620 and the total fixed payments to effective income (debt-to-income) ratio exceeds 43 percent. This change is effective for case numbers issued on or after April 1, 2013.
The following new feedback messages will be received for new submissions and resubmissions of FHA loans in Loan Prospector on and after May 12:
|Message Code||Feedback Messages|
|RSK FO||FICO less than 620 and Back-End Ratio (DTI) greater than 43.|
|RSK FN||Purchases require an investment greater than zero.|
These updates to Loan Prospector will only apply to FHA TOTAL submissions and will be based on the FHA Case Number issue date.
FHA Case Numbers
For loans with FHA Case Numbers issued on or after April 1, 2013, and submissions or resubmissions to Loan Prospector prior to May 12, 2013, the following manual eligibility checks apply:
|If an Accept Risk Class, and you…||
If a Refer Risk Class, and you…
|Determine the loan has a decision credit score below 620 and a debt-to-income ratio in excess of 43.00%, downgrade the loan to a Refer risk class and manually underwrite the loan.||Determine the loan has a decision credit score below 620 and a debt-to-income ratio in excess of 43.00%, continue to manually underwrite the loan.|
For loans submissions or resubmissions on and after May 12, 2013, you will no longer be required to complete the manual eligibility checks. The following FHA TOTAL Scorecard versions apply:
FHA Scorecard Version
|New submission with an FHA Case Number issued before April 1, 2013.||Existing version (3.1)|
|New submission with an FHA Case Number issued on or after April 1, 2013.||New version (3.2)|
|Resubmission with an FHA Case Number issued before April 1, 2013.||Existing version (3.1)|
|Resubmission with an FHA Case Number issued on or after April 1, 2013.||New version (3.2)|
|Submission or resubmissions on and after June 30, 2013 without an FHA Case Number.||New version (3.2)|