Knowing the Guidelines

Written By: Bonnie Wilt-Hild

Yes, it is important to know the guidelines and I am sure many of you who are underwriters are thinking that you do or you know them at least sufficiently to underwrite a case with the assistance or guidance from your AUS. We I am here to tell you that these days it’s a little trickier than that and I can prove that statement by way of buy backs just last month. Yes my institution had to repurchase a couple of loans, not because they did not meet agency or non agency guideline, but because investor overlays were not met.

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I have to tell you that as an underwriter with 25 years under my belt, underwriting every loan product from Conventional and Government programs, including USDA to portfolio and HELOC products including construction and construction perm, I was pretty sure I had all of the guidelines nailed. I have prided myself on my ability to spew mortgage letters by year and number as well as regurgitate all of the appropriate information contained in each one and VA circulars were no different. These days however I find my printing entire selling guides from our multiple investors, printing and including in loan files, product matrix’s address conventional or FHA requirements and basically any other information I can get my hands on. Sounds a little over the top I know but in doing so, I have discovered I don’t have nearly the handle I should on guidelines or overlays as they apply to the sale of mortgages on the secondary market.

As I have plowed through the mountains of paper which take form as investor selling guides I have discovered there are quite a few overlays that have seem to become industry standard which I really had no clue existed. Worst yet, I have been regurgitating agency and non agency guidelines without regard to some of these overlays for quite some time so I am very grateful that we have only had two cases that warranted repurchase. Take for example the number of properties owned by a single borrower and FHA. FHA simply states that the borrower may only have 1 FHA insured mortgage but as far as the number of residential properties owned goes, they really don’t care as long as none of them are encumbered by an FHA insured mortgage and the borrower’s ratios are acceptable. This however is not true with purchase investors are concerned. Several as I have recently discovered, cap the maximum number of properties owned as 4 where FHA insured mortgages are concerned. Next, the flip rule which FHA recently lifted due to the number of foreclosures within the market. FHA stated that they had called a moratorium on the 90 day rule where investors were concerned allowing the purchasing borrower to obtain FHA insured financing even if the property was being sold by a private investor. Not so with investors in the secondary market however, they all still insist that if the property seller is not a bank, GSE or FHA or VA, the case must wait at least 90 days to close and all documentation with regard to specifics set forth in ML 2006-14 still apply.

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In closing I just want to say it’s not a bad idea to go over your investor criteria frequently where salability issues are concerned. Needless to say some smaller lenders cannot afford even on repurchase request and for those of you who can I would say do it for no other reason but to avoid a trip to the principal’s office. As always, Happy Underwriting.

About The Author

Bonnie Wilt-Hild - As an NAMP® staff writer, Bonnie currently serves as a senior instructor for FHA Online University ( as well maintains a full-time mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans". If you're interested in becoming a writer for NAMP®, please email us at:

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