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Section 6.0 Credit

6.1 Credit Report

A credit report is required for every borrower. All applicants must have a valid SSI number. Fannie Mae guidelines should be utilized for processing and documenting all required credit reports and determining borrower’s credit eligibility for Amres loan purchase.

Borrower explanations are to be provided for any Disputed Tradelines with derogatory information reported in the last two years.

For borrowers who have a security freeze on their credit, the security freeze must be removed and credit repulled.

6.2 Loan Integrity and Fraud Check

Data integrity is critical to quality loan file delivery and mitigation of fraud risk. All loans must be submitted to an automated fraud and data check tool (i.e. FraudGuard, DataVerify, etc.). A copy of the findings report must be provided in the loan file along with any documentation resolving any deficiencies or red flags noted.

6.3 Credit Inquiries

Lenders must inform borrowers that they are obligated to notify the lender of any new extension of credit, whether unsecured or secured, that takes place during the underwriting process and up to the consummation of the loan.

For all inquiries within the most recent 90 days of the credit report date, a signed letter of explanation from the borrower or creditor is required to determine whether additional credit was granted as a result of the borrower’s request. If new credit was extended, borrower must provide documentation on the current balance and payment; based on the verification of all new debt/liabilities, the borrower should be qualified with the additional monthly payment. If no credit was extended, borrower must state the purpose of the inquiry.

6.4 Gap Credit Report

Seller should confirm there are no new borrower debt obligations. A gap credit report or soft-pull is required if Note date is greater than 30 days after the date of the credit report relied upon for underwriting. The gap credit report or soft-pull is to be dated within 15 days of the Note date.

When a gap report or soft-pull is required, it becomes part of the Mortgage File and all payments/balances and DTI are to be updated.

6.5 Housing History

Borrowers must have satisfactory consecutive 12-month mortgage and/or rent payment history in the three (3) years prior to loan application. Mortgage and rental payments not reflected on the credit report must be documented via an institutional Verification of Rent or Verification of Mortgage (VOR/VOM), or with alternative documentation. Alternative documentation must show the most recent 12-month history, and may be in the form of cancelled checks or bank statements, mortgage/rental statements including payment history, etc. Payments to private lenders require support with cancelled checks.

Alternative documentation is ineligible for FTHB.

6.6 Consumer Credit

6.6.1 Consumer Credit History

Applicants with current credit delinquencies are ineligible.

6.6.2 Consumer Credit Charge‐offs and Collections

No charge-offs or collection accounts in the last 48 months.

6.6.3 Consumer Credit Counseling Services

Borrowers enrolled in credit counseling are ineligible.

6.6.4 Judgment or Liens

No open judgements or liens.

6.6.5 Income Tax Liens

All income tax liens (federal, state, local) must be paid off prior to or at loan closing.

6.7 Credit Event Seasoning

No foreclosures, short-sale, deed in lieu, bankruptcies in last 48 months.

No multiple credit/housing events (FC, BK, SS/DIL) in the last seven (7) years.

6.8 Credit Score

The primary wage-earner score is used as the Representative Credit Score on Full Documentation loans. The primary wage-earner must have one (1) valid score from at least two of the following agencies: Experian (FICO), Trans Union (Empirica), and Equifax (Beacon). Only scores from these agencies are acceptable.

To determine the Representative Credit Score for a borrower, select the middle score when 3 agency scores are provided, and the lower score when only 2 agency scores are provided. For multiple borrowers, use the Representative Credit Score of the primary wage-earner for Full Documentation loans. Additional borrowers must meet the minimum Credit Score as per the matrix.

For all other Doc types, use the lowest of all borrowers’ Representative Credit Scores.

6.9 Standard Tradeline Requirements

The primary wage-earner must meet either of the minimum tradeline requirements listed below:

At least three (3) tradelines reporting for a minimum of twelve (12) months with activity in the last 12 months; or,

At least two (2) tradelines reporting for a minimum of twenty-four (24) months with activity in the last 12 months

Valid tradelines have the below characteristics:

The credit line must be reflected on the borrower’s credit report

The account must have activity in the last 12 months but may be open or closed

Student loans may be counted as tradelines as long as they are in repayment and are not deferred

An acceptable 12 or 24-month housing history not reporting on credit may also be used as a tradeline (VOR from professional management company).

The following are not acceptable to be counted as valid tradelines:

Liabilities in deferment status

Accounts discharged through bankruptcy

Authorized user accounts

Charge-offs

Collection accounts

Foreclosures

Deed-in-lieu foreclosures

Short sales

Pre-foreclosure sales

6.10 Obligations / Liabilities not appearing on Credit Report

6.10.1 Housing and Mortgage Related Obligations

All properties owned by the borrower must be fully documented. These obligations must be verified using reasonably reliable records such as taxing authority or local government records, homeowner’s association billing statements, information obtained from a valid and legally executed contract.

The monthly mortgage payment (PITIA) used for qualification consists of the following:

Principal and Interest

Hazard and flood and insurance premiums

Real Estate Taxes

Special Assessments

Association Dues

Any subordinate financing payments.

Premiums and similar charges that are required by the creditor (i.e., mortgage insurance)

6.10.2 Current Debt Obligations, Child Support, Alimony or Maintenance Obligations

A lender may use a credit report to verify a borrower’s current debt obligations, unless the lender has reason to know that the information on the report is inaccurate or disputed.

Monthly alimony, child support or separate maintenance fees should be current at time of application and must be included in the borrower’s DTI ratio. The file should contain supporting documentation as evidence of the obligation, such as a final divorce decree, property settlement agreement, signed legal separation agreement, or court order. If payments are past due, the borrower is ineligible,

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