Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (June 2019)
100 slides from Enact's investor presentation, June 2019
Slide 1: Understanding Desktop Underwriter - Advanced Guidelines and Updates
Understanding Desktop Underwriter® - Advanced Guidelines and Updates June 2019 Genworth Mortgage Insurance Corporation ©2019 Genworth Financial, Inc. All rights reserved.
Slide 2: Agenda
Agenda In Today’s Session – Fannie Mae Website – Understanding Recommendations – Understanding DU® Risk Analysis – Credit, Income and Asset and Appraisal Messages – Data Integrity Reminders and Fannie Mae Updates – Genworth Website Today’s Session Addresses Only Conventional Loans Understanding
Slide 3: Fannie Mae Website - Single Family
Fannie Mae Website - Single Family https://www.fanniemae.com/singlefamily Understanding Desktop Underwriter Advanced 3
Slide 4: Understanding Desktop Underwriter Advanced
Understanding Desktop Underwriter Advanced 4
Slide 5: Fannie Mae Communications
Fannie Mae Communications Announcements, Lender Letters, Release Notes… Understanding Desktop Underwriter Advanced 5
Slide 6: The New URLA
The New URLA Understanding Desktop Underwriter Advanced 6
Slide 7: Lender Letter LL 2019-06
Lender Letter LL 2019-06 Lender Letter-2019-06 • During the weekend of July 20th Fannie Mae will update DU implementing changes. • HomeReady® income eligibility will be limited to 80% AMI in ALL areas including low income. • DU Eligibility Assessment will also be updated the weekend of July 20th Und
Slide 8: DU 10.3 May 2019
DU 10.3 May 2019 DU Updates weekend of July 20 – HomeReady AMI & 2019 Income updates • Boarder income –boarder may not have ownership in the property • Multiple financed properties-max of two including subject – DU Validation Service Enhancements • All retirement income now eligible for validati
Slide 9: Announcement 2019-05
Announcement 2019-05 Selling Guide Update • Updated Cash Flow Form 1084 due to Tax Reform Policy • Title Insurer Rating Requirements – Must be licensed and lender approved NOT rated • Signature Requirement for Initial Uniform Residential Loan Application (URLA) (Form 1003) has been removed unles
Slide 10: Lender Letter LL 2019-05
Lender Letter LL 2019-05 https://www.fanniemae.com/content/announcement/ll1905.pdf Understanding Desktop Underwriter Advanced 10
Slide 11: Announcement 2019-04
Announcement 2019-04 Selling Guide Updates • Occupancy Types: updated to align with the recent changes announced in Lender Letter LL-2019-04, Loan Level Price Adjustments for Second Homes. • Properties Affected by a Disaster: Minor edits were made to align with the DU 10.3 • Debt-to-Income Ratio
Slide 12: Announcement 2019-03
Announcement 2019-03 Selling Guide Updates • HomeReady® Mortgage Loans (Lenders can implement now but must by 6/15/19) – Updates to multiple financed properties, boarder income, and MI coverage for HomeReady combined with Homestyle Renovation • Self-Report Process (moving from email to loan qual
Slide 13: DU Version 10.3 March Update Release Notes
DU Version 10.3 March Update Release Notes Understanding Desktop Underwriter Advanced 13
Slide 14: Announcement 2019-02
Announcement 2019-02 Selling Guide Updates • Eligibility Requirements for Manually Underwritten Loans – changes to align with the credit risk assessment in DU 10.3 focused on multiple risk facts such as lower credit scores with higher DTIs (Lenders may implement immediately but required for apps
Slide 15: Announcement 2019-01
Announcement 2019-01 Selling Guide Updates – Loan Quality Connect™ (Fannie’s new platform to manage post-purchase review process – replacing the QAS system) – Cost of Funds Index (COFI) Retirement • Removing references from Selling Guide – Requirements for Postponed Improvements • Must be a cust
Slide 16: Day 1 Certainty
Day 1 Certainty TM Understanding Desktop Underwriter Advanced 16
Slide 17: Day 1 Certainty
Day 1 Certainty TM https://www.fanniemae.com/singlefamily/desktop-underwriter-validation-service Understanding Desktop Underwriter Advanced 17
Slide 18: DU Validation Service
DU Validation Service Optional Service via DU – Lenders Must Activate to use – Execute contract with vendor(s), then execute contract/agreements with Fannie Mae – Validation Options for Income, Assets and Employment verified by Third Party Data Vendor (i.e. The Work Number® from Equifax®) – Tax
Slide 19: DU Validation Service
DU Validation Service – Lenders obtain borrower consent then orders the “verification report(s)” – Lender reviews report for any discrepancies with borrower – Lender enters details into DU and submits – DU obtains a “duplicate” report from the vendor using loan number or reference number. (Lender lo
Slide 20: How It Works - Income Example
How It Works - Income Example Understanding Desktop Underwriter Advanced 20
Slide 21: The DU Findings Report
The DU Findings Report Always Read Through All Messages Understanding Desktop Underwriter Advanced 21
Slide 22: Analyzing Desktop Underwriter Findings Report
Analyzing Desktop Underwriter Findings Report SUMMARY: Contains “DU” Recommendation and Purchase Eligibility – DAY 1 CERTAINTY MESSAGES: Day 1 certainty or Enforcement relief on property value) – RISK AND ELIGIBILITY: Provides details on risk recommendation and why loan is NOT eligible for delivery
Slide 23: Sample DU Findings Report
Sample DU Findings Report Verification Messages Broken out by Topic: – General messages •Potential Red Flag Messages •Document Expiration date •MI requirements – Credit and Liabilities •Bankruptcy, foreclosures, charge offs •Late pays, payoff of accounts, omitted liabilities – Employment and Inc
Slide 24: Desktop Underwriter Potential Red Flag Messages - Updated
Desktop Underwriter Potential Red Flag Messages - Updated Messages Must Be Cleared – Provides message text – Why message appeared – Possible ways to clear or resolve https://www.fanniemae.com/content/tool/du-potential-red-flag-message-matrix.pdf Understanding Desktop Underwriter Advanced 24
Slide 25: Desktop Underwriter Potential Red Flag Messages - Updated
Desktop Underwriter Potential Red Flag Messages - Updated Messages Must Be Cleared – Provides message text – Why message appeared – Possible ways to clear or resolve https://www.fanniemae.com/content/tool/du-potential-red-flag-message-matrix.pdf Understanding Desktop Underwriter Advanced 25
Slide 26: General Messages
General Messages Best Practices Understanding Desktop Underwriter Advanced 26
Slide 27: General Messages
General Messages Clear Potential Erroneous Information – Confirm SS# Understanding Desktop Underwriter Advanced 27
Slide 28: General Messages
General Messages Watch the expiration date of your documents! It’s 4 months - not 120 days! Understanding Desktop Underwriter Advanced 28
Slide 29: General Messages
General Messages Check Pricing Reminder- If the loan can be submitted as a HomeReady loan - All LLPA waived for transactions with credit score of 680 or greater and LTV of 80% or greater. Understanding Desktop Underwriter Advanced 29
Slide 30: General Messages
General Messages • Check for MI coverage • Check MI guidelines Reminder - If the loan can be submitted as a HomeReady loan or is an HFA loan, the MI coverage requirement is lower when the LTV is greater than 90%! Understanding Desktop Underwriter Advanced 30
Slide 31: Credit and Liabilities
Credit and Liabilities Best Practices Understanding Desktop Underwriter Advanced 31
Slide 32: Credit and Liabilities
Credit and Liabilities • Check for overlay of minimum credit score • Check for overlay of minimum number of credit scores • Check for overlay of minimum number of tradelines used in credit score Understanding Desktop Underwriter Advanced 32
Slide 33: Credit and Liabilities
Credit and Liabilities DU Credit-related Error Codes Job Aid https://www.fanniemae.com/content/job_aid/desktop-underwriter-credit-related-error-codes-job-aids.pdf Understanding Desktop Underwriter Advanced 33
Slide 34: Credit and Liabilities
Credit and Liabilities Borrowers with Credit Freeze – DU will underwrite if only one repository is frozen • A warning message will be issued by DU reminding lenders of their responsibility – If two repositories are frozen DU will issue an error message – If no credit score is generated by the two re
Slide 35: Credit and Liabilities
Credit and Liabilities If consumers ask for a freeze online or by phone, the credit reporting agency must have the freeze in place within one business day. And when consumers want to lift the freeze, the credit reporting agencies have to make that happen within one hour. (If consumers make the r
Slide 36: Credit and Liabilities
Credit and Liabilities Verification Messages Broken out by Topic: –Credit and Liabilities •Bankruptcy, foreclosures, charge offs, late pays, omitted accounts •What accounts were indicated as “to be paid off” •Mortgage payment that need additional attention This message is NOT on your sample find
Slide 37: Credit and Liabilities
Credit and Liabilities B3-5.3-07, Significant Derogatory Credit Events — Waiting Periods and Re-establishing Credit (07/29/2014) Not ALL Lenders Allow For Extenuating Circumstances Understanding Desktop Underwriter Advanced 37
Slide 38: Credit and Liabilities
Credit and Liabilities Bankruptcy And Mortgage Delinquency – With 10.2 lenders will have the ability to instruct DU to disregard bankruptcy information in the eligibility assessment that is incorrect or due to extenuating circumstances, or disregard excessive mortgage delinquency information tha
Slide 39: Credit and Liabilities
Credit and Liabilities DU Sample Data Entry – Check your specific policy if you are able to override DU with these options Understanding Desktop Underwriter Advanced 39
Slide 40: Credit and Liabilities
Credit and Liabilities – When DU issues “Approve/Eligible” using the disputed trade lines: • Include the payment, if any, in the DTI but no further documentation is required. – When loan casefile does not receive Approve recommendation including the disputed trade line, risk will be assessed EXCLUDI
Slide 41: Credit and Liabilities
Credit and Liabilities Authorized User Accounts DU considers authorized user accounts in it’s credit risk assessment. FICO scores may be impacted but DU’s risk engine looks at the trade lines and makes a credit recommendation. – Lenders should underwrite without the benefit of these trade li
Slide 42: Credit and Liabilities
Credit and Liabilities Accounts Paid off at Closing – Funds must be verified to pay off the account (if indicated in DU loan to be paid, DU will add amount to be verified); Underwriters will use discretion and MAY include a payment even if the account is being paid off. The account may remain op
Slide 43: Credit and Liabilities
Credit and Liabilities For loan casefiles underwritten through DU – DU determines the maximum allowable debt-to income ratio based on the overall risk assessment of the loan casefile – DU will apply a maximum allowable total expense ratio of 50% for non-HARP loans Understanding Desktop Underwrit
Slide 44: Credit and Liabilities
Credit and Liabilities The total monthly obligation is the sum of the following: – Monthly housing expense (PITI) – Monthly payments on installment debts and other mortgage debts that extend beyond ten months (including deferred installment loans); – Monthly payments on revolving debts (unless e
Slide 45: Credit and Liabilities...cont
Credit and Liabilities...cont The total monthly obligation….cont – 30 Day charge accounts - monthly balance will not be calculated in the DTI but included as reserves in the “required funds to be verified” – Do not Omit or mark paid by close • Verify MOP is “O” on credit report and mapped correc
Slide 46: Credit and Liabilities...cont
Credit and Liabilities...cont Student Loans – Is it Deferred or in Repayment? – Student Loans in repayment: • Use the actual payment documented from credit report; If no payment listed – Use verified loan terms from student loan lender – Documentation supplied by the borrower or – 1% of the outs
Slide 47: Credit and Liabilities...cont
Credit and Liabilities...cont The total monthly obligation is the sum of the following: – Monthly alimony, child support, or maintenance payments that extend beyond ten months SEL 2017-06 allows option to reduce income by the monthly Alimony obligation in lieu of a liability – Business debt in t
Slide 48: Credit and Liabilities...cont
Credit and Liabilities...cont The total monthly obligation is the sum of the following: SEL 2018-01 allows option to include a payment in the DTI if certain requirements are met – Selling Guide requirements are: Understanding Desktop Underwriter Advanced 48
Slide 49: Credit and Liabilities...cont
Credit and Liabilities...cont The total monthly obligation is the sum of the following: SEL 2018-09 requires SBA loans secured by the subject to be treated as a subordinated lien : Understanding Desktop Underwriter Advanced 49
Slide 50: Employment and Income
Employment and Income Best Practices Understanding Desktop Underwriter Advanced 50
Slide 51: Documenting Employment and Income
Documenting Employment and Income Break Out Income Type For Proper AUS Results Understanding Desktop Underwriter Advanced 51
Slide 52: Employment and Income
Employment and Income Paystub Reminders: – The borrower’s name and SSN# must be consistent with the application (spelling, middle initial or a JR or III) – Computer generated? – If paid hourly, the number of hours must be noted on the paystub – Dated within 30 days of application; if stale dated
Slide 53: Employment and Income
Employment and Income Verbal Verifications – Verbal verifications of employment for employed borrowers are required to be completed within 10 business days of closing or, if lenders choose, a VVOE can be completed prior to loan delivery – Verbal verifications of employment for self employed borr
Slide 54: Employment and Income
Employment and Income The IRS Form 4506-T – IRS document used to retrieve past federal tax return transcripts, 1065, 1120S, 1120, or W-2 and 1099 transcripts that are on file with the IRS. – Gives permission for a third party to retrieve the tax payer’s data. – Each applicant must sign a separate fo
Slide 55: Employment and Income
Employment and Income Commission income effective immediately with 2018-09 – All commission income will be treated the same, individual tax returns or tax transcripts will no longer be required – Or a written verification of employment (Written VOE 1005) can be used in place of either of the abo
Slide 56: Employment and Income
Employment and Income Automobile allowance Policy – The full amount of an automobile allowance may now be included as income and the lease or financing expenditure must be included as a debt in the calculation of the debt-to-income (DTI) ratio. NOTE: A history of receipt of this income continues
Slide 57: Employment and Income
Employment and Income Self Employment Understanding Desktop Underwriter Advanced 57
Slide 58: Employment and Income
Employment and Income • Use of LoanBeam for income 1084 workbook – Fannie Mae has approved the use of this tool and if lender uses it to calculate income and enter the monthly income amount in DU, Fannie Mae will provide representation and warranty enforcement relief* on the accuracy of the calculat
Slide 59: Income and Employment
Income and Employment • General Underwriting Requirements – Lenders must review the “type” of income earned and entered in DU; income used for qualifying must be reasonably stable and likely to continue at the current levels. RED FLAG: Declining income – Bonus and Overtime must be annualized or not
Slide 60: Assets
Assets Best Practices Understanding Desktop Underwriter Advanced 60
Slide 61: Assets
Assets Do not enter gift funds in Section 2. Gifts are entered in Section 4. Understanding Desktop Underwriter Advanced 61
Slide 62: Assets
Assets Other Assets - These asset types are the less common – Verify acceptability of the assets type and check to see if any program restrictions apply Understanding Desktop Underwriter Advanced 62
Slide 63: Assets
Assets Observation Section Lists Total Assets Entered By Type; Underwriting Analysis Report Lists Total Funds Required, Including Any Reserves Assets Entered By Type Total Funds Required Additional Reserves May Need To Be Verified If Paying Down Accounts, Paying Off Collections Or Judgments Or Tax L
Slide 64: Minimum Borrower Contribution
Minimum Borrower Contribution 1. If the borrower receives a gift from a relative or domestic partner who has lived with the borrower for the last 12 months, or from a fiancé or fiancée, the gift is considered the borrower’s own funds and may be used to satisfy the minimum borrower contribution requi
Slide 65: Assets
Assets Standard Depository Messages: – Number of months documentation – Refers lenders to Selling Guide for large deposits (we will discuss on a future slide) Understanding Desktop Underwriter Advanced 65
Slide 66: Assets
Assets Indications of Borrowed Funds… – Fannie Mae and Freddie Mac have the same definition of a “large deposit” – A large deposit and any deposit that is 50% or more of the total qualifying income being used to qualify – If using the funds, lenders must obtain borrower’s written explanation and
Slide 67: Assets - The Use of Gift Funds
Assets - The Use of Gift Funds – A borrower of a mortgage loan secured by a principal residence or second home may use funds received as a personal gift from an acceptable donor. – Gift funds may fund all or part of the down payment, closing costs, or financial reserves, subject to the minimum borro
Slide 68: Assets - Gift Funds - Documentation
Assets - Gift Funds - Documentation Gifts must be evidenced by a letter signed by the donor, called a gift letter. The gift letter must: – specify the dollar amount of the gift; – specify the date the funds were transferred; – include the donor’s statement that no repayment is expected; and – in
Slide 69: Assets - Gift Funds
Assets - Gift Funds The lender must verify that sufficient funds to cover the gift are either in the donor’s account or have been transferred to the borrower’s account. Acceptable documentation includes the following: – a copy of the donor’s check and the borrower’s deposit slip, – a copy of the
Slide 70: Assets
Assets Mutual Funds and Other Non-liquid Account Types: – Proof of liquidation Proof Of Liquidation – When used for the down payment or closing costs, if the value of the asset is at least 20% more than the amount of funds needed for the down payment and closing costs, no documentation of th
Slide 71: Assets
Assets Stocks or Bond Account Messages: – Non-vested stock options and non-vested restricted stock are not acceptable sources of funds for the transaction Understanding Desktop Underwriter Advanced 71
Slide 72: Assets
Assets Retirement accounts (401k or IRA) – Accounts that allow for withdrawals only in connection with the borrower’s employment termination, retirement, or death, or the account does not allow for any type of withdrawal should not be entered Look For Indications That the Account is an IRA or Re
Slide 73: IPC Updates in DU
IPC Updates in DU Updates – Sales Concessions Field or IPC is being removed from DU and lenders must make the adjustment to the purchase price manually or the purchase contract must be amended to restrict maximum IPC paid Understanding Desktop Underwriter Advanced 73
Slide 74: Assets
Assets DU uses the number of financed properties to apply the following eligibility guidelines for casefiles when the borrower has multi financed properties and the subject property is an investment or second home.: – A minimum credit score of 720 is required for borrowers with 7-10 financed pro
Slide 75: Assets
Assets For borrowers with multiple financed properties. The policy requires fewer eligibility overlays and updated reserve requirements, which are automated by DU. – A new field “Number of Financed Properties” added to additional data screen. It captures the number of 1-4 unit financed propertie
Slide 76: Assets
Assets DU determines the reserves required for the other residential financed properties (excluding the borrower’s principal residence and the subject property). The reserve amount is determined by applying a specific percentage to the aggregate of the outstanding unpaid principal balance (UPB) for
Slide 77: Property and Appraisal Information
Property and Appraisal Information Understanding Desktop Underwriter Advanced 77
Slide 78: Property and Appraisal Information
Property and Appraisal Information A Full Appraisal Is Always Required, Regardless Of The DU Appraisal Option, When The Last Sale Was An REO Or Foreclosure Sale Understanding Desktop Underwriter Advanced 78
Slide 79: Property and Appraisal - FAQs
Property and Appraisal - FAQs Appraisal Waivers Appraisal and Property-Related Understanding Desktop Underwriter Advanced 79
Slide 80: Property and Appraisal Information
Property and Appraisal Information DU 10.3 Updates Appraisal Waivers Effective December 8, Rural High-Needs Appraisal Waiver Available Understanding Desktop Underwriter Advanced 80
Slide 81: Property and Appraisal Information
Property and Appraisal Information Appraisal Waiver Updates Available for Certain Purchase and Refinance DU Casefiles – When a casefile is eligible for an appraisal waiver, Fannie Mae accepts the “submitted” value estimate as the market value. – Fannie Mae provides relief of reps and warrant
Slide 82: Property and Appraisal Information
Property and Appraisal Information Fannie offers Enforcement Relief on reps/warranties related to property value on certain loan casefiles when: – Appraisal received a CU Risk Score of 2.5 or below, and – Property type is a one-unit detached, attached or condominium property The following fields
Slide 83: Property and Appraisal Information
Property and Appraisal Information If Property Type Condominium, Project Review Type Message Will Appear: 2018-01 detached condos no longer require project approval (excluded manufactured homes) Understanding Desktop Underwriter Advanced 83
Slide 84: Underwriting Analysis Report
Underwriting Analysis Report Take Note Of… Understanding Desktop Underwriter Advanced 84
Slide 85: Underwriting Analysis Report
Underwriting Analysis Report Page #2 Validate the Details Understanding Desktop Underwriter Advanced 85
Slide 86: Underwriting Analysis Report
Underwriting Analysis Report Amortization Type –Fixed or ARM? –ARM •Note Rate vs. Qualifying Rate Understanding Desktop Underwriter Advanced 86
Slide 87: Underwriting Analysis Report
Underwriting Analysis Report ARM Qualifying Rate Always Enter The Index And Margin On ARM Loans Understanding Desktop Underwriter Advanced 87
Slide 88: Reminders
Reminders • Lenders are responsible for integrity of the data submitted to DU – Do you have all pages to the bank statement and are all large deposits addressed and sourced? – Retirement accounts? Access verified if required? Fully vested? Did you subtract any outstanding loans and is applicant full
Slide 89: Reminders and Updates From Fannie Mae
Reminders and Updates From Fannie Mae • Lenders are responsible for integrity of the data submitted to DU – Deferred loans must always be included in the debt ratio; Use amount on credit report, 1% of unpaid balance or actual verified payment – Student loans in repayment use actual payment per credi
Slide 90: Reminders and Updates From Fannie Mae
Reminders and Updates From Fannie Mae • Lenders are responsible for integrity of the data submitted to DU – Loans in process where an appraisal as been ordered and submitted and the property is in a designated disaster area, property will become eligible for a PIW on a future transaction if it meets
Slide 91: Reminders and Updates From Fannie Mae
Reminders and Updates From Fannie Mae • Lenders are responsible for integrity of the data submitted to DU – DU casefile or the Doc File ID may not be used more than once and a new error message will appear if a lender attempts to do so – DU loan casefile archival policy is extended from 270 days (9
Slide 92: Reminders and Updates From Fannie Mae
Reminders and Updates From Fannie Mae • Lenders are responsible for integrity of the data submitted to DU – An appraisal waiver is not eligible for investment properties if you are using rental income from the subject property – Appraisal waiver is not eligible if an appraisal has been uploaded thro
Slide 93: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines Understanding Desktop Underwriter Advanced 93
Slide 94: Genworth Rate Express
Genworth Rate Express® Understanding Desktop Underwriter Advanced 94
Slide 95: LOS Connections
LOS Connections Understanding Desktop Underwriter Advanced 95
Slide 96: Training Tools and Information
Training Tools and Information Understanding Desktop Underwriter Advanced 96
Slide 97: Training Tools and Information
Training Tools and Information Understanding Desktop Underwriter Advanced 97
Slide 98: Additional MI Site Information
Additional MI Site Information Understanding Desktop Underwriter Advanced 98
Slide 99: Your Genworth Resources
Your Genworth Resources ActionCenter®: 800 444.5664 Your Local Genworth Regional Underwriter Your Genworth Sales Representative Understanding Desktop Underwriter Advanced 99
Slide 100: Legal Disclaimer
Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive for accuracy, we also know that any discussion of laws and their application to particular facts is subject to individual interpretation, change, and other uncertainties. Our train