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Sun West Issues Guidance on Occupancy Underwriting

Dear Valued Partner,

To be eligible for an FHA-insured mortgage (including a full doc refinance, a purchase, or a reverse mortgage) the subject property must be the principal residence of the prospective borrower. A principal residence is a property that is occupied by the borrower for the majority of the calendar year (HUD 4155.1: 4.B.2.a-b). As a part of its due diligence, SWMC will evaluate the loan file and other materials available with respect to the borrower (e.g., the borrower’s credit report, driver’s license, hazard insurance policy for the property, and tax and utility bills etc.) to determine if there are any inconsistencies. Here are some examples of inconsistencies that could raise red flags:

1.  Other addresses reported on the borrower’s credit report are recent and frequent.
2.  Additional mortgages are reported on the borrower’s credit report.
3. Addresses on the borrower’s driver’s license, hazard insurance policy, tax bill, mortgage statement or any other document, are not consistent.
4.  The borrower owns multiple properties.

SWMC will utilize various resources (such as LexisNexis report, SiteX report, deed of trust(s) of the other mortgages appearing on the borrower’s credit report etc.) to investigate all of the other reported addresses. If, after conducting its review of the applicable loan file, SWMC determines that there is not sufficient documentation to make a definitive conclusion, then SWMC may request for one or all of the following additional documents:

1. The IRS tax transcripts obtained through a Form 4506 showing the subject property as the ‘Home Address’
2. Latest SSN Benefit Statement showing the subject property address
3. The most recent SSA-1099 showing the subject property address

In order to expedite the origination process, SWMC directs its loan originators to be aware of the above red flags and, if an occupancy red flag is present, to submit a copy of the additional documents listed above together with the loan file. This will help to eliminate delays in closing. If one and/or all of the above documents fail to satisfactorily mitigate the occupancy concerns, then SWMC may, at its discretion, order the occupancy inspection on the subject property and other properties owned by the borrower. The cost of the occupancy inspection(s) can NOT be charged to the borrower and shall be borne by our broker/correspondent partners. In all circumstances, Sun West reserves the right to decline any loan for approval or purchase.

Notwithstanding the foregoing review by Sun West, the Broker or Correspondent submitting the loan to Sun West, as applicable, remains fully responsible for all occupancy deficiencies.  If after closing or purchasing an FHA-insured loan, Sun West, HUD or any other regulatory body, or any investor, determines that the borrower of an FHA-insured loan did not copy the property in accordance to FHA or other applicable guidelines, the loan shall be deemed a Problem Loan and Sun West shall pursue all of its rights and remedies under its agreements with the Broker or Correspondent to repurchase the loan and indemnify Sun West for all losses incurred.

If you have any questions, please contact your Account Executive at (855) OK-SUNWEST or (855) 657-8693.


Sun West Mortgage Company, Inc.
18303 Gridley Road
Cerritos, CA 90703
Phone : (800) 453-7884

Equal Housing OpportunityThis information is provided to licensed wholesale brokers only and may not be copied or distributed to customers or potential customers. All loans are subject to approval. Certain restrictions may apply. Listed pricing is a morning indication only. Program rates, prices, guidelines, fees, costs, terms and conditions are subject to change without notice.

Sun West Mortgage Company, Inc. (NMLS ID 3277) is licensed by the Department of Corporations as a California Finance Lender (License #603 0119) and is licensed by the Department of Real Estate (License #00793885). Refer to to see where SWMC is a licensed lender. In all states, the principal licensed office of Sun West Mortgage Company, Inc. is 18303, Gridley Road in Cerritos, CA 90703; Phone: (800) 453-7884