General Closing Specifications
Loan documents used by the Correspondent must conform with the specifications of the applicable mortgage loan program and all applicable federal, state and local laws and regulations.
Mortgage loans must incorporate the most current Fannie Mae/Freddie Mac Note and Security Instruments, including all applicable riders and addenda.
Correspondent warrants that all delivered loans comply with the restrictions on transactions with Specially Designated Nationals and Blocked Persons and the Sanctioned Nations administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury.
For each mortgage delivered to PennyMac, the original of the Note must be delivered pursuant to the requirements of this Guide and the Note must bear the following endorsement by the Seller:
PAY TO THE ORDER OF PENNYMAC CORP. WITHOUT RECOURSE
All other names are considered unacceptable and will result in the pending of the loan for purchase. Notwithstanding any endorsement language placed on the Note, all representations, warranties, covenants and obligations set forth in this Guide and/or the Correspondent Loan Purchase Agreement survive and remain effective and enforceable after endorsement and delivery of the Note.
PennyMac will accept an Allonge for conforming loans only – both conventional and government. Seller may use an Allonge on conforming loans if the following conditions are met:
- The Allonge is permanently affixed to the Note
- The Allonge references the Borrower’s name, the property address and the original principal balance of the Note
- The form of the Allonge and its use complies with all applicable laws
- The use of the Allonge does not impair PennyMac's status as a ‘holder in due course’ or any of PennyMac's rights under the Purchase Documents.
The Correspondent further agrees to indemnify PennyMac from any loss or damage incurred as a result of the use of an Allonge for the Note endorsement(s).
The uniform instruments include provisions governing whether the loan will be accelerated if the borrower sells or transfers the mortgaged premises or any interest in the mortgaged premises or whether instead the loan may be assumed by a third party who acquires the mortgaged premises, or any interest in the mortgaged premises by sale or transfer. These provisions are sometimes referred to as "due-on-sale" clauses.
- Uniform instruments for different mortgage products may have different due-on-sale clauses.
- The type of due-on-sale clause set forth in the uniform instruments used to originate a particular mortgage determines whether or not the mortgage is assumable by the party to whom the mortgaged premises are transferred.
Initial Application Date
At the time of registration/commitment of a Best Effort loan, the Correspondent must identify the initial application date.
For AOT/Mandatory loans, the application date must be provided on a copy of the dated application (clearly identified as “initial”) and must be included in closing file delivered for purchase.
Signatures on all closing documents must meet the following specifications:
- Each borrower’s name and signature must be consistent on all closing documents; matching to the names appearing in the title insurance policy.
- Signatures must appear exactly as they are typed on the document, in ink. Each borrower’s signature must appear directly above his or her typed name in the signature portion of each signed document.
- If corrections to the documents are required, then ONLY strike-overs are permitted; initialed by each borrower. Corrective coverings (i.e. white out) must never be used.
- Interviewer must sign either the Initial or the Final Application Form 1003
- Must be signed by borrower if face to face or mail
- Interviewer must sign either the Initial or the Final Application Form 1003
- Must be signed by borrower on all loans
|Please Note: PennyMac will audit all loans for these signatures as stated above|
The Note for a conventional first mortgage must provide for the borrower to pay a 5% late charge on any installment that is not received by the 15th day after it is due. If state law does not allow a charge that high, the maximum amount that is allowed should be used. The late charge should be computed on the principal and interest (P&I) installment only, not on the full monthly payment (PITI).
The lender's name should be shown as the mortgagee.
It is the Correspondent’s sole responsibility to ensure that all insurance carriers or agents are notified to change the mortgagee clause to:
PennyMac Loan Services, LLC
HUD-1 Settlement Statement
A completed and signed original/certified copy of the Final HUD-1 Settlement Statement is required by PennyMac, and must be included in the closing file for purchase.
Cross Default Leaseholds
A cross-default provision, which provides that a default on the lease is a default on the mortgage, must be contained on the mortgage rider for mortgage loans secured by leasehold estates.
Interest Credits at Closing
PennyMac will allow interest credits at closing through the seventh calendar day of the month in which the mortgage loan is closed.
A Hardship/30 day letter must be signed by the borrower acknowledging that the first payment is due in less than 30 days.
Completing an Occupancy Rider for conventional loans of two or more units, in which the borrower(s) has indicated the subject property will be owner-occupied within 60 days, is suggested by PennyMac.
In order to clearly establish remedies on the occasion a discrepancy in occupancy is later discovered, an Occupancy Rider to the Mortgage/Deed of Trust/Security Deed, or a similar form is recommended for use.
Inclusionary Zoning Restrictions allow state/local governments the ability to require zoning restrictions that call for a specified percentage of new development in a selected area to be set aside to supply houses for low and moderate income persons.
A property subject to Inclusionary Zoning Restrictions is acceptable if:
The property is owner-occupied;
- The zoning restrictions are subordinate to the mortgage;
The right to remedy a default under the mortgage is not impaired; and
- No restrictions are placed on the resale of the property if it is obtained through foreclosure or deed in lieu of foreclosure.
Satisfaction of Underwriting Conditions
All underwriting conditions, such as; prior-to-close and at-closing, must be satisfied prior to purchase.
IRS Form 4506-T and Tax Transcript RequirementsIRS Form 4506 T Requirements
Correspondents are required to submit a borrower signed Request for Transcript of Tax Return Form 4506-T signed by each borrower and dated at closing. As PennyMac selects loans for either a pre-funding or post closing quality control review, the IRS Form 4506-T will be submitted by PennyMac to the IRS for tax validation and/or tax filing purposes.Tax Transcripts
Tax transcripts are required for each borrower whose income is utilized as a source of repayment. Transcripts must be provided for the number of years of income used to qualify the borrower. If only W2 income is used to qualify, the lender may obtain W2 transcripts as long as tax returns are not included in the loan file.
Note: Jumbo loans require two years of transcripts.
Generally, when the documentation used to verify income is from the same calendar period as the tax transcript, the information must match exactly. However, if the income documentation is from the current calendar year and the transcript is from a prior year, there can be acceptable variances. If this variance exceeds 20%, document the rationale for using current income.
If tax transcripts are not available (due to a recent filing) a copy of the IRS notice showing “No record of return filed” is required along with documented acknowledgement receipt (such as IRS officially stamped tax returns or evidence that the return was electronically received) from the IRS and previous one year of tax transcripts.
PennyMac will consider seller provided compliance certification as evidence of loan compliance. At a minimum, PennyMac requires all files be documented with certification of compliance for the following regulations:
- The loan is not a High Cost Mortgage under HOEPA (and is not a High Cost loan under state or local regulations)
- Truth in Lending Act, including ATR and QM requirements
- GSE Points & Fees
- Notice of Right to Cancel (if applicable)
The certification must clearly evidence compliance with these regulations. While the required scope of the report/certificate is limited, Correspondents are reminded of the compliance Representations and Warranties outlined in the Seller Guide.
Satisfaction of Risk Screening Conditions
PennyMac may, at their sole discretion, utilize third party risk screening services for any group or category of loans. And, while not published, there are certain categories of loans upon which PennyMac will always do risk screening prior to purchase. When the lender locks a loan and PennyMac can determine at the time of lock that this loan fits PennyMac's criteria for risk screening prior to purchase, PennyMac will place a notice to the lender on the loan commitment, informing them of the same.
Eligible Loan Modifications
Any eligible loan modification must be signed by all borrowers on the note and/or mortgage, as appropriate based on the scope of the modification, and the signed modification must be provided to PennyMac prior to funding of the loan. Loan modifications presented to PennyMac after funding may not be honored.