Tuesday, May 6, 2014

IDS Compliance Updated Docs to Conform with Freddie Mac Bulletin 2014-6

Due to FHLMC bulletin 2014-6, which states:

Rent loss insurance for 2- to 4-unit Primary Residences 

Prior to this Bulletin, the Guide required that the Borrower maintain six months’ rent loss insurance for a 2- to 4-unit Primary Residence when rental income is used in qualifying. We are removing the requirement for rent loss insurance when the property is a 2- to 4-unit Primary Residence. Sections 22.19, General Property Insurance Requirements, and 58.3.2, Rent Loss Insurance, have been updated to reflect this change.

As a result of this change, we are adding a permitted change to the 1-4 Family Rider, Form 3170. If the Mortgaged Premises is a 2- to 4-unit Primary Residence, originators must delete Paragraph D (Rent Loss Coverage) from the 1-4 Family Rider. (emphasis added)

As a reminder, the Borrower must maintain six months’ rent loss insurance for an Investment Property when rental income is used in qualifying, as required in Section 22.22.1, Investment Property Mortgages;

The IDS system has been programmed to remove Paragraph D (Rent Loss Coverage) from the 

1-4 Family Rider when:

• the note date is on/after 4/24/2014, 
• the occupancy type is set to primary, and
• the number of units on the 1003 is NOT set to 1.

While this change affects loans with note dates on/after 4/24/2014, it was not added to the system until late afternoon 5/1/2014.

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