Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (July 2020)
72 slides from Enact's investor presentation, July 2020
Slide 1: Asset And Reserve Review
Asset And Reserve Review Fannie Mae And Freddie Mac Guidelines July 2020 Customer Education Brought to you by: Genworth Customer Development and Process Consulting ©2020 Genworth Financial, Inc. All rights reserved. 0
Slide 2: Agenda
Agenda What we will cover – COVID-19 Updates – What are the Required Funds – Earnest Money – Different Down payment sources – Reserves – Large Deposits – Multiple Financed Properties – General Documentation Requirements – Genworth website Only Conventional Loans Are Covered In Today’s Session; High
Slide 3: Lender Letter 2020-03
Lender Letter 2020-03 Updates to Fannie Mae Policy: https://singlefamily.fanniemae.com/media/22316/display Asset and Reserves 2
Slide 4: Lender Letter 2020-03
Lender Letter 2020-03 Effective for applications taken April 14 through July 31, 2020 – Age of Documents • For most income and asset documents age requirements is reduced from four months to two months or 60 days from the note date. If an asset statement is issued quarterly, lenders must obtain the
Slide 5: Bulletins 2020-8 & 2020-23
Bulletins 2020-8 & 2020-23 Guidance Related to Covid-19 https://guide.freddiemac.com/app/guide/bulletin/2020-8 https://guide.freddiemac.com/ci/okcsFattach/get/1003909_7 Asset and Reserves 4
Slide 6: Bulletins 2020-8 & 2020-23
Bulletins 2020-8 & 2020-23 The temporary credit underwriting requirements below are effective for Mortgages with Application Received Dates on or after April 14, 2020 and remain in place for Mortgages with Application Received Dates on or before July 31, 2020; however, Sellers are encouraged to appl
Slide 7: What Are The Required Funds
What Are The Required Funds Purchase Price (or refinance of all debt to be paid off) - Earnest Money Deposit (only if verified) - Other Financing (if applicable) - Loan Amount Applied for + Closing Costs + Prepaids and escrows + Judgments, collections, garnishments and debt to be brought current, pa
Slide 8: Earnest Money Verification
Earnest Money Verification Review Purchase Agreement for Amounts Paid – What is the source of the Earnest Money or “Deposit”? – Do you have a copy of the check? – Is it from an account you have verified? – Is it cancelled or cleared? – Did the borrower explain it was a gift? If so, gift documentatio
Slide 9: Down Payment Source
Down Payment Source Review the Financial Information Section – What is the indicated source(s) of down payment? – Are those sources properly documented in your file? – If you are originating, indicate to the Underwriter what funds will be used! Asset and Reserves 8
Slide 10: Down Payment Source
Down Payment Source Establish assets were not borrowed from an unacceptable source – Such as a cash advance on a credit card or cash on hand* – Gift from a friend – Unsecured personal loan Document that the borrower has the minimum contribution needed for the transaction – Certain loan programs may
Slide 11: Fannie Mae
Fannie Mae Desktop Underwriter® Asset and Reserve Requirements Asset and Reserves 10
Slide 12: Minimum Borrower Contribution
Minimum Borrower Contribution The following table describes the minimum borrower contribution requirements for transactions that contain gifts. 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,
Slide 13: The Use of Gift Funds
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 borrower contribut
Slide 14: Gift Funds - Acceptable Donor
Gift Funds - Acceptable Donor A gift can be provided by: – a relative, defined as the borrower’s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or – a fiancé, fiancée, or domestic partner. The donor ma
Slide 15: Gift Funds - Documentation Requirement
Gift Funds - Documentation Requirement 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 – ind
Slide 16: Gift Funds - Availability & Transfer of Funds
Gift Funds - Availability & Transfer of 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
Slide 17: Sample DU Findings Report
Sample DU Findings Report Verification Messages Broken out by Topic: –Assets and Reserves •Amount to verify, liquidation and documentation requirements Asset and Reserves 16
Slide 18: Sample DU Findings Report
Sample DU Findings Report Verification Messages Broken out by Topic: Asset and Reserves 17
Slide 19: Asset Types
Asset Types • Types of Assets used for closing/reserves: – Checking/Savings: Amount held in applicant’s account as of the most recent bank statement – Stocks: Number of shares and current price or amount of evaluation as per Brokerage account balance – Gift Deposited: Amount of Gift received from an
Slide 20: Asset Types
Asset Types • Types of Assets used for closing/reserves – Trust Funds: Evidence of ownership, value and evidence of withdrawal – Other Liquid Assets Cash Value of Life Insurance – Savings Bonds: Evidence of ownership and liquidation value – Funds to be Saved: From payroll or Tax Refund if documented
Slide 21: IRA or Retirement Funds
IRA or Retirement Funds Look for indication the account is an IRA or retirement account - borrowers do not always tell you. – Many investment accounts can be retirement accounts so carefully review for evidence of the account type – Look for any loans taken out again the account as you must subtract
Slide 22: 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 the borrower’s actual receipt of funds realized from the sale or liquidation is require
Slide 23: Proof Of Liquidation Example
Proof Of Liquidation Example Applicable for loans submitted to DU® and manually underwritten loans; Applies to – Stocks, Bonds, Mutual funds and retirement accounts in the form of stocks, bonds and mutual funds. Follow COVID-19 Policies April 14 to July 31 Asset and Reserves 22
Slide 24: Pending Sale
Pending Sale Review purchase and sale agreement for existing home to determine estimated net proceeds; When will transaction close? Sales Price minus commissions, repairs, mortgage balances (from credit report). Asset and Reserves 23
Slide 25: Pending Sale
Pending Sale Review purchase and sale agreement for existing home to determine estimated net proceeds; When will transaction close? Sales Price minus commissions, repairs, mortgage balances (from credit report). Will borrower net sufficient funds? Will transaction close in time?? Asset and Reserves
Slide 26: Pending Sale
Pending Sale Your Borrower Property being sold Asset and Reserves 25
Slide 27: Pending Sale
Pending Sale What did the seller (your borrower) net? Is it sufficient for the transaction? Are they using other sources of funds as well? Do you see an existing mortgage paid off? $50,000 Asset and Reserves 26
Slide 28: What Are Reserves?
What Are Reserves? • Reserves are defined as: – Principal and Interest – Hazard, flood and/or mortgage insurance premiums (as applicable) – Real Estate Taxes – Ground rent and/or special assessments – Owner’s association dues or monthly coop corporation fees – Any subordinate financing payments Asse
Slide 29: Asset and Reserves
Asset and Reserves • Unacceptable sources of reserves – Funds that are not vested – Funds that cannot be withdrawn under circumstances other than the account owner’s retirement, employment termination, or death – Stock held in an unlisted corporation – Non-vested stock options and non-vested restric
Slide 30: Assets and Reserves
Assets and Reserves • Funds Section – Summary of “Funds” section found on Underwriting Analysis Section – Submit only assets to cover “required” to be verified or $16,613 in this example Review The “Asset Section” Of The DU Findings Report For Additional Messages Asset and Reserves 29
Slide 31: Assets and Reserves
Assets and Reserves If reserves are required, document that the borrower has sufficient reserves from acceptable sources. – Reserves are dependent on: • Risk of the loan file and how many properties the borrower owns • Property and occupancy type • Product and underwriting Type Always verify your ap
Slide 32: Large Deposits
Large Deposits Indications of Borrowed Funds… – 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 documentation of the source of large deposits that are reflected on ba
Slide 33: Additional Guidance on Large Deposits
Additional Guidance on Large Deposits https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting- Borrowers/Chapter-B3-4-Asset-Assessment/Section-B3-4-2-Verification-of-Depository- Assets/1736868381/B3-4-2-02-Depository-Accounts-12-06- 2016.htm?SearchType=cove
Slide 34: Additional Guidance on Large Deposits
Additional Guidance on Large Deposits https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting- Borrowers/Chapter-B3-4-Asset-Assessment/Section-B3-4-2-Verification-of-Depository- Assets/1736868381/B3-4-2-02-Depository-Accounts-12-06- 2016.htm?SearchType=cove
Slide 35: Borrowers with Multiple Financed Properties
Borrowers with Multiple Financed Properties DU Version 10.0 reflects a simplified policy that applies to loans 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 Finance
Slide 36: Calculations of Reserves for Multiple Financed Properties
Calculations of Reserves for Multiple Financed Properties 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
Slide 37: Borrowers with Multiple Financed Properties
Borrowers with Multiple Financed Properties Asset and Reserves 36
Slide 38: Reserves
Reserves Read The Findings Report for What Needs To Be Verified Asset and Reserves 37
Slide 39: Freddie Mac
Freddie Mac Loan Product Advisor® Asset and Reserve Requirements Asset and Reserves 38
Slide 40: Freddie Mac's Total Funds To Be Verified- Job Aid
Freddie Mac’s Total Funds To Be Verified- Job Aid https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/cashtoclose.pdf Asset and Reserves 39
Slide 41: Freddie Mac cash to close fact sheet link
https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/cashtoclose.pdf Asset and Reserves 40
Slide 42: Types of Assets Eligible and Ineligible
Types of Assets Eligible and Ineligible https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/cashtoclose.pdf Asset and Reserves 41
Slide 43: Assets Breakdown Page-YOUR LOS Has Something Similar
Assets Breakdown Page-YOUR LOS Has Something Similar https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/fun_guide.pdf Asset and Reserves 42
Slide 44: New Asset/Reserve Messages
New Asset/Reserve Messages Asset and Reserves 43
Slide 45: 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 46: Documentation Matrix
Documentation Matrix – Updated June 2020 – Assists with processing and documenting loan files – Be mindful of Product Overlays https://sf.freddiemac.com/content/_assets/resources/pdf/update/docmatrix.pdf Asset and Reserves 45
Slide 47: Asset and Reserve Requirements
Asset and Reserve Requirements Use to validate basic asset and reserve requirements – Most recent matrix dated June 2020 https://sf.freddiemac.com/content/_assets/resources/pdf/update/docmatrix.pdf Asset and Reserves 46
Slide 48: Gifts
Gifts Much more detailed information regarding gift funds https://sf.freddiemac.com/content/_assets/resources/pdf/update/docmatrix.pdf Asset and Reserves 47
Slide 49: Asset Requirements
Asset Requirements https://sf.freddiemac.com/content/_assets/resources/pdf/update/docmatrix.pdf Asset and Reserves 48
Slide 50: Asset Requirements
Asset Requirements Liquidation Requirements Follow COVID-19 Policies April 14 to May 17 https://sf.freddiemac.com/content/_assets/resources/pdf/update/docmatrix.pdf Asset and Reserves 49
Slide 51: Asset Requirements- URLA
Asset Requirements- URLA Asset and Reserves 50
Slide 52: Asset Requirements
Asset Requirements https://sf.freddiemac.com/content/_assets/resources/pdf/update/docmatrix.pdf Asset and Reserves 51
Slide 53: Reserve Policy Freddie Mac 5501.2 (b)
Reserve Policy Freddie Mac 5501.2 (b) https://guide.freddiemac.com/app/guide/content/a_id/1000665 Asset and Reserves 52
Slide 54: General Assets and Reserves
General Assets and Reserves Asset Documentation Reminders, Best Practices, Genworth Website and Guidelines Asset and Reserves 53
Slide 55: Asset Documentation Requirements
Asset Documentation Requirements Originator must view the “Original” documents – Asset statements provided by anyone other than the applicant are typically NOT acceptable. – A bank generated print out can be acceptable but it must be signed and stamped by the institution/teller and meet a majority o
Slide 56: Asset Documentation Requirements
Asset Documentation Requirements Fannie Mae Asset Documentation Requirements https://selling-guide.fanniemae.com/ Asset and Reserves 55
Slide 57: Asset Documentation Requirements
Asset Documentation Requirements Fannie Mae Asset Documentation Requirements https://selling-guide.fanniemae.com/ Asset and Reserves 56
Slide 58: Asset Documentation Requirements VOD
Asset Documentation Requirements VOD Freddie Mac Documentation Requirements https://guide.freddiemac.com/app/guide/content/a_id/1000665 Asset and Reserves 57
Slide 59: Asset Documentation Requirements Asset Statements
Asset Documentation Requirements Asset Statements Freddie Mac Documentation Requirements https://guide.freddiemac.com/app/guide/content/a_id/1000665 Asset and Reserves 58
Slide 60: Asset Documentation Requirements
Asset Documentation Requirements When reviewing bank statements look for the following: – The bank statement: is the borrower’s name, account #, and address consistent with 1003/65? – Verify statement includes an account number (it can be truncated but not blacked out) – Are all large deposits expla
Slide 61: Asset and Reserves
Asset and Reserves Primary account number: 9297 178799m March 9, 2017- Apri 8,2017 =Page 9of 10 et All American Bank Way2Save® Savings Activity summary Account number: 3193125749 Beginring balance on 9 $205029 DeposiAdsone 25003 Vehirandettctons 000 Tewsiitanmsacceur lems and conditions aesty Ending
Slide 62: Asset Documentation- VOD
Asset Documentation- VOD https://singlefamily.fanniemae.com/media/13886/display Asset and Reserves 61
Slide 63: Asset and Reserve Best Practices
Asset and Reserve Best Practices Some Reminders: – Enter each asset separately according to account type – Verify you have all pages to the asset statement – Do not double count earnest money – Break out gift funds as a separate entry in your LOS – Review for large deposits and remove any unsourced
Slide 64: Top MI Decision Errors
Top MI Decision Errors https://new.mi.genworth.com/underwriting-tips-and-credit-policy Asset and Reserves 63
Slide 65: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines Asset and Reserves 64
Slide 66: Genworth Rate Express
Genworth Rate Express® Asset and Reserves 65
Slide 67: LOS Connections
LOS Connections Asset and Reserves 66
Slide 68: Training Tools and Information
Training Tools and Information Asset and Reserves 67
Slide 69: Training Tools and Information
Training Tools and Information Asset and Reserves 68
Slide 70: Additional MI Site Information
Additional MI Site Information Asset and Reserves 69
Slide 71: Your Genworth Resources
Your Genworth Resources ActionCenter®: 800 444.5664 Your Local Genworth Regional Underwriter Your Genworth Sales Representative Asset and Reserves 70
Slide 72: 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