Fannie Mae is set to release a new version (9.0) of its automated underwriting system called DU (Desktop Underwriter) over the weekend of Oct 20th, 2012. Fannie Mae tightened some underwriting guidelines based on their performance data. Here are some highlights:
Limited Review for Condominium to be capped at 80% (currently at 90%) – So if you are buying a condo in California with less than 20% down, you would need to provide more documentation related to the condo project. Usually these documents are provided by the HOA office. In some cases these documents may not meet Fannie Mae Condo eligibility criteria resulting into declining of the loan.
Retirement of Expanded Approvals – Other than DU Refi Plus Program (Also called HARP), all other loans will not get an expanded approvals. Expanded approvals (also called EA in short) were for borrowers who had less than perfect mix of LTV, Credit, Debt to income Ratios and Reserves. This could mean some borrowers may not qualify for Fannie Mae loans.
Reduction in maximum LTV for ARM Loans – Adjustable Rate Mortgages (ARM) for California home purchase and refinance rate/term loans will be reduced to 90% from current 97%. With ARM loans currently at around only 5% of all loans originated, with almost all of them under 90% – this shouldn’t have any substantial impact.
Self-Employed borrowers to produce more documents – Fannie Mae would require 2 years of Tax Returns (1040s) for all Self-Employed borrowers. Currently in some cases only 1 year of 1040 was sufficient. The condition of being in the same business for a minimum of 2 years stays the same.
If you are trying to navigate the underwriting guideline maze while applying for a California Home Purchase or Refinance loan – please contact me at 408.615.0655 or [email protected]