B3-4.4-02, Requirements for Certain Assets in DU (06/01/2022)

When DU requires assets to be verified, DU will indicate the minimum verification documentation requirements necessary for the lender to process the loan application. This level of documentation may not be adequate for every borrower and every situation. The lender must determine whether additional documentation is warranted.

DU will not require documentation of assets for refinance transactions when the total funds to be verified are $500 or less.

For depository assets (checking and savings accounts, money market funds, and certificates of deposit), DU will require the following:

• two consecutive monthly bank statements (60 days of account activity) for all purchase transactions, or
• one monthly statement (30 days of account activity) for all limited cash-out and cash-out refinance transactions.

Monthly bank statements must be dated within 45 days of the initial loan application date.

Quarterly bank statements must be dated within 90 days of the initial loan application date, and the lender must confirm that the funds in the account have not been transferred to another asset account that is verified with more current documentation.

A Verification of Deposit (Form 1006) can be obtained in place of bank statements.

When DU validates assets, DU issues a message indicating the acceptable documentation. Compliance with the DU message satisfies the requirement for documenting assets. This documentation may differ from the requirements described above. See  B3-2-02, DU Validation ServiceB3-2-02, DU Validation Service.

Enter the amount of a bridge (or swing) loan in the asset section 2a of the loan application. Do not include the amount of the bridge loan in any other liquid asset. (For example, do not enter the amount of the loan both as a bridge loan and in a checking account, even if the loan funds have been deposited.)

Bridge loans should also be considered in the net equity calculation for properties that are pending sale. (In other words, the amount of the bridge loan should be subtracted from the net proceeds to avoid counting this asset twice.)

See  B3-4.3-14, Bridge/Swing LoansB3-4.3-14, Bridge/Swing Loans for additional information.

Note: It may also be necessary to enter the bridge loan and corresponding monthly payment as a recurring liability in the liabilities section of the loan application. See the bridge loan liability discussion in  B3-6-05, Monthly Debt ObligationsB3-6-05, Monthly Debt Obligations.

Earnest money is entered in Section 2b in the loan application. It is treated as a credit to the transaction and will reduce the borrower’s required funds to close as reflected in Section L4. The earnest money check is assumed to have cleared the borrower’s bank account and must not be reflected in the balance of an asset account.

See  B3-4.3-09, Earnest Money DepositB3-4.3-09, Earnest Money Deposit, for documentation requirements.

Gifts or donations from entities (grants) are permitted and documented in accordance with B3-4.3-04, Personal GiftsB3-4.3-04, Personal Gifts, and  B3-4.3-06, Grants and Lender ContributionsB3-4.3-06, Grants and Lender Contributions.

Gifts and grants are entered in Section 4d of the loan application and identified as being deposited or not deposited. Gifts and grants that are deposited have been received by the borrower and the value should be included in another asset account. The amount of the gift or grant is not included in available funds.

Gifts and grants that are not deposited are not included in another asset account. The amount of the gift is included in available funds.

Enter a gift of equity in Section 4d of the loan application.

A gift of equity must meet the gift of equity requirements defined in  B3-4.3-05, Gifts of EquityB3-4.3-05, Gifts of Equity.

See  B3-4.3-10, Anticipated Sales ProceedsB3-4.3-10, Anticipated Sales Proceeds, for additional information.

The lender must calculate the net equity outside of DU for a property marked Pending Sale in Section 3 of the loan application. The amount is entered in the asset section (2b) using the asset type Proceeds from Real Estate Property to be Sold on or Before Closing.

If a bridge loan is obtained, the amount of the bridge loan is entered as an asset and must be subtracted from net equity before entry in the loan application.

When the net equity is positive, DU will add the amount to the funds available for closing. When the net equity is negative, DU will subtract the amount from the funds available for closing.

Proceeds from properties that have already been sold must be included in a depository account, such as a checking or savings account.

Enter the value of personal assets that will be converted to a liquid asset (or sold) prior to closing in Section 2b using the asset type Proceeds from Sale of Non-Real Estate Asset. (See B3-4.3-18, Sale of Personal AssetsB3-4.3-18, Sale of Personal Assets, for additional information.) Life insurance that will be used for the transaction is entered in Section 2a using the account type Cash Value of Life Insurance. An Other Asset (liquid) may be entered for other types of assets that will be used for the transaction, such as pending tax refunds that will be received prior to closing.

A verification message will require evidence of the value of the asset and confirmation that the asset was converted to cash.

Borrowers can borrow against an asset they own, such as a 401(k) account or real estate, according to the requirements of  B3-6-05, Monthly Debt ObligationsB3-6-05, Monthly Debt Obligations. The amount of the secured loan should be entered in Section 2b using the asset type Secured Borrowed Funds. The secured loan amount should be subtracted from the market value of the actual asset, and the net asset value should be entered. For example, if the borrower has a vested value, less taxes and penalties, of $30,000 in a 401(k) account and borrows $10,000 against the 401(k), enter $10,000 as secured borrowed funds and enter $20,000 as retirement funds.

A loan that is secured against a liquid asset owned by the borrower (such as a 401(k) or mutual fund) does not have to be entered as a liability in the loan application if the appropriate documentation is provided.

Loans that are secured against real estate, or any other non-liquid asset, must be entered as the applicable liability (for example, as a mortgage).