Age of documentation
Effective: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through Jun. 30, 2020.
In order to ensure that the most up-to-date information is being considered to support the borrower’s ability to repay, we are updating our age of documentation requirements for all loans (existing and new construction) as follows:
- We are modifying age of document requirements from four months (120 days) to two months (60 days) for most income and asset documentation. If an asset account is reported on a quarterly basis, the lender must obtain the most recently issued quarterly statement.
- When the lender receives employment and income verification directly from a third-party employment verification vendor, we are now requiring that the information in the vendor’s database be no more than 60 days old as of the note date.
- There are no changes to the age of documentation requirements for military income documented using a Leave and Earnings Statement, Social Security, retirement income, long-term disability, mortgage credit certificates, public assistance, foster care, or royalty payments, and the lender can continue to apply standard age of document requirements as stated in the Selling Guide.
- Due to the federal income tax filing extension granted through Jul. 15, 2020, we are eliminating the following documentation requirements. These normally apply for income types that require copies of federal income tax returns when the mortgage has an application or disbursement date between Apr. 15th and Jul. 15th:
- a copy of the IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Tax Return), and
- IRS Form 4506-T (Request for Transcript of Tax Return) transcript confirming “No Transcript Available” for the 2019 tax year.
All other requirements contained in B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, continue to apply.
Conversion of construction-to-permanent financing – single-closing transactions
The Selling Guide currently allows certain single-closing construction-to-permanent transactions with credit documents dated more than 4 months but no more than 18 months at the time of conversion to permanent financing when certain conditions are met. (See B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions). Among those conditions is a requirement that the credit documents are dated within 120 days of the original closing.
Consistent with the age of credit documentation requirements in this Lender Letter, this requirement is being updated to reflect that the income and asset documentation must be dated within 60 days of the original closing. All other conditions related to the age of credit documents contained in B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions continue to apply.
For additional information, refer to the published Lender Letter LL-2020-03, Impact of COVID-19 on Originations.