Conventional Assets FAQ Flashcards
Q: Can we use business assets to close if the borrower’s self-employed business income is not being used to qualify?
A: Yes, this acceptable for both Fannie & Freddie. We just need to verify that the borrower is owner of the asset account & business. We do not need to do a cash flow analysis of the business.
Q: Can a borrower utilize crowd funding (gofundme.com, etc.) as a source of down payment?
No not acceptable source
Q: Is cryptocurrency / bitcoin allowable?
A: Bitcoins and other types of digital currency are not eligible assets because the statements used to document these assets do not provide the information required in Section B3-4.2-01 of FNMA’s Selling Guide, and they are not valued in terms of US currency.
In order for the proceeds from a Bitcoin or other digital currency exchange to be considered as an eligible asset, it must be converted to US currency and deposited into an eligible account where the account statement indicates borrower ownership and all required information is provided.
The source of a large deposit may be from Bitcoins or another digital currency, provided there is documentation to show the funds coming from the digital currency account that was owned by the borrower.
NOTE: Conforming agency only, always check investor guidelines
Q: If there is a large deposit in a joint account and the deposit came from a source that is only in the non-borrowing account owner’s name, is the treated as a gift or large deposit?
FNMA: Since the original funds were not the borrower’s funds, they would be considered a gift and must be treated as such with gift letters, copies of checks and input as a gift in AUS.
FHLMC: Will allow these funds to be treated as borrower’s own funds provided we document the source of the large deposit.
Q: My borrower’s realtor is his sister. Can he receive a gift from her or her husband?
A: No, neither FNMA nor FHLMC permit gifts from the real estate agent or allow funds from the realtor’s commission to be applied towards down payment. The realtor on the transaction, in this case a family member, can contribute a concession towards borrower’s closing costs. However, the concession that is given from the realtor will be subject to the transaction’s Interested Party Contribution limits.
Q: If a borrower is self-employed, can the business assets be used by the borrower if there are other owners in the business?
A: Yes, provided you get 3 months of bank statements so that a cash flow analysis of the business can be performed by the underwriter. Can only use the amount of assets that match the borrower’s percentage of ownership.
Q: Can tax prorations be used to meet the down payment requirements?
No
Q: Can a gift be given from a trust?
A: FNMA: No, a gift cannot be given to borrower directly from a trust.
FHLMC: Yes. In order for the trustee to be able to give a gift, the trustee must:
Be either a settlor or a beneficiary of the trust in addition to being trustee (must collect a copy of the trust to verify)
Meet Freddie Mac definition of a Related Person (gift letter to specify relationship)
Q: Are Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) funds acceptable sources for down payment, closing costs or reserves?
A: No. UGMA or UTMA funds are not acceptable funding sources for down payment, closing costs or reserves.
