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Subject: Underwriting Guideline Changes: Credit and Liabilities
Importance: High


CREDIT AND LIABILITIES Credit and Liabilities (This guideline change is effective for applications dated on or after July 1, 2010 and applies to conventional transactions.)

Deed-in-Lieu of Foreclosure and Pre-foreclosure Sale (for Desktop Underwriter): These transaction types are completed as alternatives to foreclosure. A deed-in-lieu of foreclosure is a transaction in which the deed to the real property is transferred back to the servicer. A pre-foreclosure sale or short sale* (see below) is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer.

The following waiting period requirements apply:

• Two years for transactions with a maximum LTV of 80%
• Four years for transactions with a maximum LTV of 90%
• Seven years for transactions for transactions with an LTV greater than 90%

*Short Sale: A short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed. This applies regardless of the payment history of the mortgage. If any mortgage trade lines reflect they have been settled for less than the full balance, the above wait periods will apply. If the sale of any current properties is occurring during the subject transaction and it appears a short sale may result, a current pay off letter will be requested to confirm a short sale is not occurring. This short sale requirement applies to Fannie Mae and Freddie Mac transactions.

Thank you!