Download PDF Guide (Published: December 13 2023)
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Evaluating Large Deposits
A large deposit is defined as a single deposit that exceeds 50% of the total monthly qualifying income for the loan. When bank statements (typically covering the most recent two months) are used, the lender must evaluate large deposits.See B3-4.1-04, Virtual Currency for additional information when a large deposit may be from virtual currency that was exchanged into U.S. dollars. Requirements for evaluating large deposits vary based on the transaction type, as shown in the table below.
Transaction Type | Evaluation Requirements |
---|---|
Refinance transactions | Documentation or explanation for large deposits is not required; however, the lender remains responsible for ensuring that any borrowed funds, including any related liability, are considered. |
Purchase transactions |
Examples
|
Note: If the source of a large deposit is readily identifiable on the account statement(s), such as a direct deposit from an employer (payroll), the Social Security Administration, or IRS or state income tax refund, or a transfer of funds between verified accounts, and the source of the deposit is printed on the statement, the lender does not need to obtain further explanation or documentation. However, if the source of the deposit is printed on the statement, but the lender still has questions as to whether the funds may have been borrowed, the lender should obtain additional documentation.
The DU validation service automates the assessment of large deposits. When assets are validated, DU issues a message indicating which large deposits require documentation. Compliance with the DU messages satisfies the requirement for documenting large deposits. See B3-2-02, DU Validation Service
For additional information, seeB3-4.2-02, Depository Accounts.
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I am an expert in the realm of mortgage lending, particularly familiar with the operations, policies, and guidelines associated with Fannie Mae, a key entity in the U.S. housing finance market. My expertise stems from an in-depth understanding of the processes involved in originating, underwriting, pricing, servicing, and delivering single-family loans.
Regarding the content provided, it's focused on various aspects related to Fannie Mae's guidelines and practices for assessing large deposits in borrowers' accounts during the loan underwriting process. It delves into the specific requirements and evaluation methods for different transaction types, like refinance and purchase transactions.
Key concepts discussed in the content include:
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Large Deposits Evaluation: Explains the definition of a large deposit and how lenders must assess and document them, especially when these funds are necessary for down payments, closing costs, or financial reserves.
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Transaction Type Differences: Highlights the differing documentation requirements for large deposits between refinance and purchase transactions.
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Acceptable Documentation: Discusses the acceptable forms of documentation to support the source of large deposits, such as borrower explanations, proof of asset ownership, or gift funds documentation.
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Calculation and Use of Funds: Details how lenders should calculate and use the remaining funds after deducting the unsourced amount of a large deposit for underwriting purposes.
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Automated Assessment via DU: Mentions the DU (Desktop Underwriter) validation service that automates the assessment of large deposits and how compliance with DU messages suffices for documenting large deposits.
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Exceptions and Further Documentation: Provides exceptions and instances where further documentation might be necessary, despite the source of the deposit being evident on the account statement.
The document's focus is to guide lenders on the proper handling of large deposits in borrowers' accounts, ensuring compliance with Fannie Mae's standards throughout the underwriting process. It emphasizes the importance of documenting the source of funds to mitigate risks and maintain quality control in the mortgage lending process.
If you have any specific questions or need further clarification on any of these aspects, feel free to ask.