Underwriting Exception Matrix

• If the non-permitted addition represents a legal use of the property under local zoning laws, the following criteria applies:
• The property must conform to the subject neighborhood and the market
• Comparable sales must include at least one property with a non-permitted addition
• The subject property complies with all investor guidelines
• The value assigned by the appraiser must be based on the contributory value of the addition, considering the quality of above -grade finished work. In some cases, no value will be given.
• The quality of the work is described in the appraisal and deemed acceptable (“workmanlike quality”) by the appraiser
• The addition does not result in a change in the number of units (e.g. a 1 unit property converted to 2 units (regardless of how the appraiser classifies the property with the addition)
• If the non-permitted addition represents an illegal use of the property under local zoning law, the following criteria applies:
• The illegal use must conform to the subject neighborhood and the market
• The property must be appraised based upon its current use
• The appraisal must report that the subject property/addition represents an illegal use
• The appraisal report must demonstrate that the subject property with the addition are typical for the market by providing at least three comparable sales that have the same illegal use
• Verification that the existence of the addition will not jeopardize future hazard insurance claims is required
• The appraiser needs to state that non-permitted additions are typical for the market area and a typical buyer would consider the "unpermitted" additional square footage to be part of the overall square footage of the property.
• The appraiser needs to state that he has no reason to believe the addition would not pass inspection for a permit.
• The quality of the work is described in the appraisal and deemed acceptable (“workmanlike quality”) by the appraiser
• The addition does not result in a change in the number of units (e.g. a 1 unit property converted to 2 units (regardless of how the appraiser classifies the property with the addition)
• If the non-permitted addition represents an illegal use that results in the property being illegally zoned, the property is not eligible
• Must have DU Approval
• Currently not available on: Texas Home Equity, DU Refi Plus

Considered
Cash Out

• The property be jointly owned by the borrower and ex-spouse
• Both parties have been occupying for at least the last 12 months as their principal residence
• Must provide a signed divorce decree, or written agreement that states the terms of the property transfer and the proposed disposition of the proceeds from the refinance transaction
• The borrower who acquires the sole ownership must not receive any proceeds of the refinance, and must be able to qualify for the mortgage
• If the refinance combines the first with a Non-Purchase Money 2nd, it will be considered a “Cash-Out Transaction”
• Must not disregard the payment history before the date of the court assignment (i.e., divorce decree)
• Must have DU Approval
• Currently not available on: LIBOR ARMs (including High Balance), IO LIBOR ARMs, Premium, Texas Home Equity, DU Refi Plus

• DU Approval required
• A one- or two-unit property that includes an accessory apartment (also referred to as a mother-in-law, mother-daughter, or granny unit) may be acceptable. A mortgage secured by a three- or four-unit property with an illegal accessory apartment is unacceptable. The appraiser must be advised of any information regarding the suite, including its legality when ordering the report.
• The local government must allow the property to be rebuilt if damaged or destroyed. The governing agency's (or official's) name should be identified in the report.
• No rental income will be counted from the accessory unit
• If the accessory apartment represents a legal use of the property under local zoning laws, the following criteria applies:

• If the accessory apartment represents an illegal use of the property under local zoning law, the following criteria applies:

• Guidance for underwriting flips can be found here: http://www.eprmg.net/ConfFlips.pdf
• The appraiser must report and analyze a minimum three-year sales history for the subject property.
• If there is an increase in value, the appreciation or improvements must be explained.
• If the value has increased by 15 percent or more in one year or 30 percent in three years from the original sales price the appraiser must analyze and explain the increase if due to a below market sale, such as a property in foreclosure. If the increase was due improvements, the appraiser must analyze, explain and the file must contain documentation such as contracts, receipts, and photographs.
• If the value has increased by 20 percent or more, a field review with at least two additional comps to support value is required.
• Must meet all requirements in the Anti-Flipping section of the guidelines
• Available for all occupancy types
• Currently not available on: Texas Home Equity, DU Refi Plus

• Must have DU Approval
• Each borrower must have 2 trade lines with a minimum 12-month history OR 1 trade line with a minimum 12-month history and a 12-month housing reference evidenced by cancelled checks
• Currently not available on: LIBOR ARMs (including High Balance), Premium, Texas Home Equity

• Currently available on all products.

• Must meet all other requirements from guidelines for non-permanent resident aliens
  
• Currently not available on: LIBOR ARMs (including High Balance), Premium, Texas Home Equity

• Currently available on all products