NMLS #1820
Residual Income Policy (Conventional/Jumbo/AIO)
CMG MORTGAGE, INC., dba CMG FINANCIAL
Policy and Procedure
RESIDUAL INCOME POLICY (CONVENTIONAL/JUMBO/AIO)
January 10, 2014
Applications dated on or after January 10, 2014, CMG Mortgage, Inc. dba CMG Financial (hereinafter referred to as “CMG”) willrequire all conventional and jumbo underwriters to verify and complete the Income Worksheet to meet the Qualified Mortgage residual income “Rebuttable Presumption” and the Ability to Repay requirements. CMG defines Residual Income as the borrower(s) qualified total gross monthly income less the borrower(s) total gross monthly debt combined. CMG requires every Retail and Wholesale Underwriterto document the income calculation methodology used to determine the Debt to Income ratio on the Income Worksheet for all conventional loan files. The Income Worksheet has two (2) income calculation methodologies that include using the borrower(s) total monthly earnings, or using the variable income that provides the averaging method. When reviewing the loan file, the Retail and Wholesale Underwriter must make the good faith credit decision on the income calculation methodology used. The Retail and Wholesale Underwriter must verify that the income documentation meets the Qualified Mortgage Appendix Q requirements listed under the “Ability to Repay and Qualified Mortgage Policy” located on the Intranet under the Compliance Policy and Procedures 2014.
The loan file must include documentation for thecurrent or projected income or assets that the consumer will have to satisfy the Ability to Repay. The Retail and Wholesale Underwriter must verify the consumer’s qualified gross monthly income by reviewing documentation such as W-2 or payroll statements, tax returns, asset statements,benefits-program documentation, or records from the employer. It is the Retail and Wholesale Underwriter’s responsibility to determine if the consumer has the Ability to Repay the loan with income currently being earned/received,or has retirement assets sufficient to generate a monthly stream of income that will continue for 3 years. Refer to the Underwriting Guidelines to view the Residual Income overlay requirements.
The income section of the Income/Residual Worksheet will be required on all closed-end residential mortgage loans except for Government Loans. Residual income analysis is not be required on FHA loans since HUD’s final rule defining “Qualified Mortgage” expressly states that it is not changing its underwriting guidelines to recognize the concept of “residual income.” Additionally the Income/Residual Worksheet will not be required on VA or USDA loans. Residual income analysis also is not required for the All In One™ Loan Program because like HELOCs, it is an open-ended Residential Mortgage Line of Credit and exempt from the ATR regulations, although CMG will require the Income/Residual Worksheet on the All In One™as an overlay. The Residual section of the Income/Residual Worksheet will be required when the debt to income (DTI) ratio exceeds 43 percent.
The Income/Residual Worksheet, which will be provided to the borrower prior to the loan consummation, is required for all Jumbo loan products, including the All In One™ Loan Program. CMG will require that the borrower initial and sign the Residual Income Worksheet acknowledging the income calculation used to decision their mortgage loan.
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Residual Income Policy (Conventional/Jumbo/AIO)Page 1 of 1
Created January 2014