More Upcoming Changes to Underwriting

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I originally wrote this post at Rain City Guide back in June of this year.  Fannie Maes tougher guidelines will go into effect in just a few days on September 1, 2009.  You can read the original post and comments by clicking here. 

Fannie Mae issued Announcement 09-19 amending some very basic underwriting guidelines that will not only impact conventional financing; it will apply to FHA insured loans that are underwriting using Fannie Mae’s DU.   You can read the entire announcement by clicking  here.

Here are some of the changes:

  • Credit documents will be valid for 90 days instead of the current 120 for existing construction.   The age of the document is measured from the date of the document to the date the Note is signed.
  • IRS Forms 4506 or 4506-T is required at application and at closing.  This is due to fraud (misrepresentation of income).
  • Age of appraisal is reduced from 6 months to 4 months.
  • Trailing Secondary Wage Earner Income is eliminated.   Now with a relocation, only the income of the spouse with actual employment may be considered.  Previously, it was possible to use the relocating spouse’s income from their employment prior to the relo without having an actual job.
  • Verbal Verification of Employment required within 10 days of signing the Note for employment income and within 30 days for self-employed income.  (Our company has always performed a verbal VOE prior to funding).
  • Stocks, bonds and mutual funds now valued at 70% instead of 100% to be used as reserves.   Due to market volatility, Fannie Mae is devaluing your portfolio.   This means that if you provide your mortgage originator with a stock, bond or mutual fund statement showing an ending balance of $10,000; the figure used for qualifying and on the application will be $7,000 (70% of the value).   Stock options and non-vested restricted stocks are no longer eligible to use as reserves.
  • Retirement accounts valued at 60% instead of 70% to be used as reserves.  

Fannie Mae’s effective dates are to follow…if the loan is manually underwritten, this applies to applications dated on or after September 1, 2009.   However, expect to see lenders and banks to adopt these guidelines early.

Comments

  1. A lot of great info, the appraisal info helps tremendously, especially during the HVCC market. Also the stocks, bonds, and mutual funds valuing at 70% will have a major effect on business.

    Omar
    Voyage Financial Group

  2. Great topic,
    HVCC is there to protect not only the borrower but also all parties involved. Getting a home mortgage in the past was as easy as buying a car but these days you need to have credit, income, equity and assets. FHA mortgages do not use HVCC appraisals. Talk to your loan consultant today.

    Kal Patel
    Voyage Home Loans

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