Announcements 21-0019: Carrington Non-QM Program Underwriting Enhancements

Determining Loan-to-Value: If the property was purchased ˃ 6 months (was 12 months) and < 12 months from the application date, the current appraised value can be used to determine loan-to-value. Two full appraisals are required and the lower of the two values will determine the loan to value.

If the property was purchased < 6 months (was 12 months) from application date, the lesser of the current appraised value or the previous purchase price plus documented improvements (if any) must be used. The purchase settlement statement and any invoices for materials/labor will be required.

Short Term Rentals: Short term rental properties may not be modified in a way that affects the residential character of the property. For example, parking lots and reception areas are not acceptable. Examples of short term rentals are Air BNB, Vacation Rental By Owner (VRBO), etc.

Short term rentals of less than one month in term will be qualified as an unleased property unless the borrower is able to demonstrate a 12-month history of rents on the subject property. The borrower may provide documentation from their property management service documenting 12 months gross rents.

Determining the Loan-to-Value - Refer to the Additional LTV Limits chart on the Investor Advantage Matrix. Short term rentals allowed to exceed 65% LTV (up to 75%) with certain conditions met.

The Debt-Coverage Ratio (DCR) must be calculated using the lesser of the documented rents from the property management service or the appraiser's estimate of market rents.

Evidence of Primary Residence: All borrowers must presently own or rent their primary residence. Evidence is required.

Borrowers who own a primary residence and are purchasing a 1-unit Single Family Residence must provide:

• Proof of ownership of a primary home superior in value and/or appeal to subject Borrowers who rent a primary residence and are purchasing a 1-unit Single Family Residence must provide:
• Evidence of an active lease in place
• Primary residence must be supported by one of the following characteristics:
  • Geographically consistent with borrower’s place of employment. If the URLA employment section is blank, the Underwriter must add a condition for the URLA to list the borrower’s Employer name and address; or
  • General appeal and location of primary is superior to subject property

Note: Living rent free is not acceptable. For a married borrower whose primary residence is titled or leased to their spouse’s name only, documentation must be provided to support the borrower occupies the spouse’s residence and the mortgage or rent rating on the primary residence complies with Mortgage and Rental Payment Verification.