jjacovo
103 Posts |
 Posted - 05/12/2008 : 09:49:22 AM
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Heads Up People! see below
Fannie Mae Announcement 08-08 is 25 pages long. It's not only grueling to wade through, the new and more constrictive guidelines will be just as difficult for originators to swallow. It is effective on June 1, 2008, in conjunction with Fannie Mae's implementation of a new version of Desktop Underwriter, Version 7.0. Some of the changes, which are applicable to both manual and DU underwriting, include:
• Foreclosures: The new rule mandates five years must pass after a foreclosure before a borrower is eligible for a new Fannie Mae loan. Previously, DU would consider loans with foreclosures after two years. Now, the loan will receive a Refer or a Caution/IV if it hasn't been a full five years.
Extenuating circumstances won't be considered unless it's been at least three years after the foreclosure, and the loan will have to be manually underwritten.
Borrowers must wait for seven years before they are eligible for a cash-out refinance.
After five years, the borrower would have a 10% down payment to be eligible for a purchase. After five years, the borrower must have a 680 or higher credit score.
• Minimum Credit Score: ALL Fannie Mae loans must have a minimum credit score of 580. The only exceptions are certain streamlined refinances which don't require credit scores along with loans that are manually underwritten using non-traditional credit.
The minimum score applies to all other loans, manual or DU, including those using Fannie's Expanded Approval - EAI, EAII, and EAIII - programs.
• Loan-to-value Ratios: Maximum LTV, CLTV, and HCLTV ratios for many programs are reduced. LTV charts include minimum credit scores for manually underwritten loans. An example is 90%/90%/90% for second home mortgages
• Debt-to-income Qualifying Ratio: DU Version 7.0 will be much more "conservative" with the DTI qualifying ratio, according to the DO/DU Release notes dated March 31, 2008.
• Expanded Approval: EA is letting a lot more loan types in, including manufactured housing, MCM, cash-out refinances for second homes and investment properties, and more. However, credit qualifying will be more difficult and additional fees are imposed based on a combination of LTV and credit score.
Overall, I think the biggest challenge will be dealing with DU, and not being able to get loans through that were previously a piece of cake. There is no question Fannie has severely tightened up on their automated underwriting risk analysis.
For those of you who read this before June 1, 2008, my best advice is to get your loans submitted to DU before that date. If you do, you submit to DU 5.7 and get to use all of the old rules - even for re-submissions. You just might get a few loans approved that won't be eligible after June 1st.
After June 1st, you may find that Freddie Mac's Loan Prospector is more lenient than DU, depending on the loan file. You can always specifically ask your lender to submit the loan to LP if you don't have the capability in your own office. Remember, you really do have some control over whether the loan goes Fannie Mae or Freddie Mac.
This is the tip of the iceberg. For complete (simplified and explained) information on the rules that actually affect loan officers, check out www.MortgageCurrentcy.com. It saves you all kinds of time trying to sort through what is relevant, and gives you the changes in plain English (without taking 25 pages), and then tells you how the changes affect your loans and what you can do about it.
Leslie Petersen is a well-known mortgage guideline expert. With over 30 years experience in mortgage lending, she writes http://www.MortgageCurrentcy.com an online newsletter on the changes in Fannie/Freddie, FHA, VA and other regulatory agencies-but with a twist. For originators, underwriters and managers, she interprets them in plain English and shows them how to make the rules and changes work for them--and get more of their loans approved. Find her at leslie@MortgageCurrentcy.com. |
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