A. Introduction

Credit evaluation is instrumental in determining whether each borrower on a loan can manage credit and is an acceptable risk to AmMAC. There are several components of credit evaluation, including:

 

Validity of credit report
 

Credit history review
 

Inaccurate/disputed credit
 

Adverse credit

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B. Validity of the Credit Report

Review of Credit Report - Data Integrity

 

Compare the date, name, current address, and Social Security number listed on the application to the information on the credit report and other documentation such as a paystub, bank statement, etc.
 

Reconcile debts with information on application

Note: Discrepancies must be addressed with the borrower and corrected. If the name or Social Security number on the credit report is incorrect, a new report must be pulled with the correct information. Discrepancies between accounts listed on the application and accounts listed on the credit report must be addressed by the borrower.

Hawk Alerts and Checkpoint Messages

Hawk Alerts and Checkpoint messages are used to identify Social Security numbers and concerns with property addresses. These messages must be reviewed carefully for all loans to identify possible fraud.

Inquiries

A review of inquiries must be completed on all loans.

A written explanation must be obtained from borrowers regarding any inquiries within the past 180 days, to determine if the inquiries have resulted in additional debt not reflected on the credit report, that would need to be included in the debt ratio or that might represent an unacceptable source of down payment. If the inquiry did result in new credit, the borrower needs to detail the current balance and repayment terms.

Public Records

Public records are generally filed with a local government agency, usually in conjunction with a court proceeding. Some public records, such as judgments, bankruptcy, foreclosure, tax liens and unpaid child support may indicate a problem with the borrower's credit and may have title implications. All public records must be paid in full or 

C. Credit History

A borrower with an established credit history that demonstrates an ability to manage credit and repay creditors as agreed is considered an acceptable credit risk. More weight is placed on those references best demonstrating the borrower's experience, motivation and ability to manage credit. We believe an established history of regular and consistent payments, particularly housing or larger installment debt payments, should be given more consideration than numerous, small revolving account payments.

All borrowers on a loan must have an acceptable credit history and valid credit  score.

D. Minimum Sufficient Credit

Sufficiency of credit is dependent on whether the borrower’s credit report contains at least one traditional mortgage account, rated for at least 12 months. The table below describes what is required to fulfill the sufficiency of credit requirement:

WITHOUT a Mortgage Rated on the Credit Report

WITH a Mortgage Rated on the Credit Report

At least 3 open trade lines, all with at least a 24 month history. (EXCLUDES accounts where the borrower is only an authorized user)

At least 3 open trade lines, including the 1 rated mortgage account. (EXCLUDES accounts where the borrower is only an authorized user)

All 3 accounts with the 24 month history, must also be active within the last 12 months.

The 2 non-mortgage trade lines have to be open at least 24 months and rated within the last 24 months, but are not required to be currently active within the last 12 months.

PLUS, must be able to verify 12 months payment history for a mortgage or rent, via canceled checks, bank statements, or cashier’s check receipts.

Only the mortgage trade line needs to be open and active for at least the last 12 months.
If the mortgage is not rated for at least 12 months, must meet the requirements for “WITHOUT a Mortgage Rated on the Credit Report” and the balance of the un-rated mortgage trade needs to be made up via canceled checks, bank statements or cashier’s check receipts to complete 12 months payment history (whether that was rent or a different mortgage). If a full 12 months cannot be verified, the borrower is ineligible for financing.

If insufficient credit exists (regardless of the credit score qualifying for our program), the credit score is not valid and cannot be used, so the borrower is not eligible for financing with AmMAC.Top of Form

E. Non-Traditional Credit References

Allowed for verifying rental history and payment of private (non-rated) mortgages only:

 

Rental housing – The only acceptable form of verification of rental history is canceled checks. Verification of Rent (VOR) from a professional management company is not acceptable. The Borrower must be able to supply the 12 most recent months canceled checks, bank statements or money order receipts, to prove timely payment of rent.
 

Private Mortgage – The only acceptable form of verification of payment history on a private mortgage is via canceled checks; a Verification of Mortgage (VOM) is not acceptable. The Borrower must be able to supply the 12 most recent months canceled checks, bank statements or money order receipts, to prove timely payment of the mortgage.

Minimum Documentation Requirements

 

When the credit is a relative or other person having an established relationship with the borrower, canceled checks, bank statements or money order receipts are the only acceptable forms of verification to evidence the payments are of a continuing nature and have been paid in a timely manner.

 F. Adverse Credit

There are several types of adverse or derogatory credit, including late payments, past due accounts, collection accounts, charge-offs, liens, repossessions, settled for less than full payment accounts, judgments, bankruptcies, foreclosures, and credit counseling. Adverse credit information may render the borrower ineligible for financing with AmMAC.

Significant Adverse Credit

Significant adverse credit will immediately disqualify a borrower, and includes the following:

 

Any 30 + day late payment on a mortgage or rental rating within the most recent 12 months.
 

Any currently delinquent mortgage or rental account.
 

Any 60-day (or worse) late payments on revolving or installment accounts within the most recent 12 months.
 

Any account that is showing more than 2x30 in the most recent 12 months, for a revolving or installment account.
 

Any currently delinquent revolving or installment account(s).
 

There is a bankruptcy or credit counseling within the last 5 years or foreclosure, short sale, or deed-in-lieu of foreclosure within the last 7 years.

 

Collections, Liens, Judgments, Repossessions & Garnishments

 Public record searches that reveal judgments, tax liens, garnishments, repossessions and/or collection accounts do not immediately disqualify a borrower (assuming all other credit requirements are met) but any that have outstanding balances must be paid prior to or through our loan closing (regardless of age or balance). Garnishments must also be paid in full regardless of their balance, unless they are for things like Alimony or Child Support which are ongoing and have no payoff balance. For garnishments of this nature, gross monthly income must be reduced by the amount of the monthly garnishment showing on current paystubs. Accounts settled for less than owed are treated like paid charge-offs (i.e. no impact to borrower eligibility, other than the impact already reflected in their FICO score and/or payment history for that account).

All borrowers must have acceptable credit regardless of whether their income and/or assets are needed to qualify. The acceptable credit history of one borrower may not be used to offset the unacceptable credit history of another borrower on the loan.

 Past Due Accounts

 

Borrower(s) with accounts currently past due are ineligible for mortgage financing from AmMAC

SHORT-REFINANCES OR RESTRUCTURED MORTGAGE LOAN REQUIREMENTS

Not Allowed.

A short refinance or a restructured mortgage loan occurs when the terms of the original transaction have been changed resulting in absolute forgiveness of debt or a restructure of debt through modification or the origination of a new loan that results in:

 

forgiveness of a portion of principal and/or interest on either the first or second mortgage or
 

application of a principal curtailment by or on behalf of the investor to simulate principal forgiveness or
 

conversion of any portion of the original mortgage debt to a “soft” subordinate mortgage or
 

conversion of any portion of the original mortgage debt from secured to unsecured

SHORT-SALE REQUIREMENTS

A short sale is the sale of a property for less than the total amount needed to satisfy the mortgage obligation. AmMAC considers these to be the equivalent of a deed-in-lieu of foreclosure. Any short sale appearing in the Borrower’s credit within the past 7 years is cause for immediate disqualification of the Borrower.