Fannie Mae has issued a Lender Letter to its single-family sellers that updated the temporary policies enacted on March 31 in response to the COVID-19 crisis while reaffirming a key tenet regarding borrower income requirements.
The Lender Letter stated Fannie Mae is extending its pandemic-related temporary policies from the original May 17 cutoff date until June 30. In response to the risks associated with loans that have yet to be sold into the secondary market, Fannie Mae alerted lenders that it was “temporarily suspending bulk transactions and requiring that loans sold on a flow basis be no more than six months old to be eligible for sale to us.”
The government-sponsored enterprise also suspended representation and warranty relief for employment validation within the Desktop Underwriter validation service on loan case files created on or after May 4 through June 30, although lenders are still required to perform a verbal verification of borrower employment status.
The Lender Letter also enabled two digital solutions as replacements to in-person activities. In regard to appraisals, the Lender Letter enabled the use of Collateral Underwriter and other third-party tools in lieu of obtaining field reviews on 10% of the random sample. Remote online notarization was also made effective for all loans, depending on the state, and will remain in effect until further notice, with Fannie Mae stating that it would “incorporate these policies into the Selling Guide in a future update.”
Furthermore, the Lender Letter acknowledged the extension of federal income tax filing through July 15 by eliminating the need for two tax forms – IRS Form 4868 and Form 4506-T – when the mortgage has an application or disbursement date between April 15 and July 15. Updates were made regarding the use of market-based assets on loans with applications between April 14 and June 30, include a borrower’s receipt of funds realized from a sale or liquidation of stocks, stock options and mutual funds assets.
However, Fannie Mae did not change its policies regarding borrower employment status in view of the furloughs and layoffs that burdened much of the U.S. workforce.
“We recognize that many unemployed and furloughed individuals are eligible for unemployment benefits under the CARES Act,” the Lender Letter stated. “However, unemployment compensation is short-term in nature and is therefore not a reliable and predictable source of income for borrowers who are not established seasonal workers.”