4301.5: Cash-out refinance Mortgages (10/31/18)

A cash-out refinance Mortgage must meet the applicable requirements in Sections 4203.4 and 4301.2.

A cash-out refinance Mortgage must be an Accept Mortgage, an A-minus Mortgage or a Manually Underwritten Mortgage with a minimum Indicator Score set forth in Exhibit 25, Mortgages with Risk Class and/or Minimum Indicator Score Requirements, to be eligible for delivery.

A cash-out refinance Mortgage is a Mortgage in which the use of the loan amount is not limited to specific purposes.

A Mortgage placed on a property previously owned free and clear by the Borrower is always considered a cash-out refinance Mortgage.

At least one Borrower must have been on the title to the subject property for at least six months prior to the Note Date, except as specified below.

If none of the Borrowers have been on the title to the subject property for at least six months prior to the Note Date of the cash-out refinance Mortgage, the following requirement(s) must be met:

At least one Borrower on the refinance Mortgage inherited or was legally awarded the subject property (for example, in the case of divorce, separation or dissolution of a domestic partnership)

OR, all of the following:

The Settlement/Closing Disclosure Statement or an alternative form required by law from the purchase transaction must reflect that no financing secured by the subject property was used to purchase the subject property. A recorded trustee's deed or equivalent documentation may be used when a Settlement/Closing Disclosure Statement or an alternative form required by law was not used for the purchase transaction.
The preliminary title report for the refinance transaction must reflect the Borrower as the owner of the subject property and must reflect that there are no liens on the property
The source of funds used to purchase the subject property must be fully documented
If funds were borrowed to purchase the subject property, those funds must be repaid and reflected on the Settlement/Closing Disclosure Statement for the refinance transaction
The amount of the cash-out refinance Mortgage must not exceed the sum of the original purchase price and related Closing Costs as documented by the Settlement/Closing Disclosure Statement or an alternative form required by law for the purchase transaction, less any gift funds used to purchase the subject property. A recorded trustee's deed or equivalent documentation may be used when a Settlement/Closing Disclosure Statement or an alternative form required by law was not used for the purchase transaction.
There must have been no affiliation or relationship between the buyer and seller of the purchase transaction

(a) Credit Fees in Price for cash-out refinance Mortgages

A special Credit Fee in Price will be assessed and billed to the Seller in conjunction with the sale of certain cash-out refinance Mortgages. The Seller must refer to Exhibit 19, Credit Fees in Price, for information on the Cash-Out Refinance Mortgages Indicator Score/Loan-to-Value Credit Fee in Price and other Credit Fees in Price. Credit Fees in Price are paid in accordance with the Credit Fee in Price provisions outlined in Chapter 6303.

(b) Delivery and pooling

See Section 6302.16 for delivery and pooling requirements for cash-out refinance Mortgages.