Fannie Mae announced some changes to their loan guidelines. Some of the changes make it easier to get that home loan you're finding for, while other make it tougher.
A word of warning here - the changes are Fannie guideline changes only. They do not reflect the so called "investor overlays" that are tougher than the normal program guidelines. Lenders place the tougher overlays onto the sponsoring loan program, Fannie in this case, to make the loans more spicy to investors. The sources of money in the mortgage chain - Mortgage Bankers and their banks that furnish lines of reputation to close loans - require that mortgage bankers consequent these overlays as they do not want to fund loans that are un-sellable on the secondary market. This means that the mortgage secondary market is still not wholesome and that we've not achieved a situation where money is flowing to market.
Current Fannie Mae Refi Plus Programs
For the most part overlays are strikingly uniform, though there may be tiny variations lender to lender. The best known overlay is the reputation score requirement on Fha loans. Fha does not mandate a minimum reputation score on its loans, though investors have overlaid one on Fha loans. The minimum started out at 580 and now is at 660.
Here are the changes Fannie announced:
Gift or grant funds of 5% are now standard from non-profits. This has all the time been a particular sore spot with sales agents, borrowers and lenders. While Fannie agreed to accept grant funds, extra diligence is required to decide if your lender will accept the grant. Also be aware that if mortgage insurance is required, the Mi firm may not accept the grant. Thus while your lender may take it, the Mi firm is an additional one cook in the kitchen with veto power over the approval.
The tougher news is that Fannie adjusted its debt-to-income ratio down to 45% from 55%. Its also announced changes to the manner in which it would use debt in the ratio, when the debt has ten payments or less to payoff.
45% has been the norm with lenders, so this change does not impact most if not all mortgage programs. What is considerable is that change to calculation of mortgage debt with less than 10 payments to run in the loan. Lenders have routinely exempted debt, revolving, mortgage, installment, etc., that could be paid off in less than 10 installments. This change seems to take this exemption away and force lenders to add the debt service back to the Dti calculation, development it tougher to qualify.
So while the Dti calculation is beyond doubt a no-change, inclusion of the balances that could be paid off in 10 months represents conclusion of one of the last techniques loan officers were using to get loans approved. I wouldn't even call it a loop hole.
Overall, this evidences the fact that the secondary market is still not in any place it needs to be.
Fannie Mae Announces Underwriting Changes - Much Ado About Nothing
