What is Happening in the Mortgage Market

This Saturday Fannie Mae will be implementing some important changes to their automated underwriting system called “Desktop Underwriter or DU”. If you are a buyer or person that wants to refinance who might have an issue with any of the items listed below it is very important that you make loan application and your file run through Fannie Mae’s Desktop Underwriter by tomorrow, Friday December 11^th .

All of the changes are important but a couple that will have the greatest impact are:

· DTI expense ratio capped at 45% - can go up to 50% with strong compensating factors such as high credit scores, large down payment, reserves

· Length of time eligible for financing after Foreclosure or Bankruptcy changes

Should you have any questions or you would like me to speak with, feel free to call or email anytime!

During the weekend of December 12, Fannie Mae will be implementing a new version of DU – (Fannie Mae’s automated underwriting program which is required for all loans sold to them) Changes will include a new credit risk assessment and eligibility guidelines. These changes will only impact new loans submitted to DU on or after December 12.

Highlights of the changes include;

· Expense Ratio – max 45%

· Flexibilities to 50% for strong compensating factors.

· Will not impact DU RefiPlus, VA or FHA loans.

· Min Credit Score – 620.

· Impacts Conventional, FHA and VA Loans

· Revised Mortgage Insurance requirements – (Lower MI with LLPA must

be priced and sold directly to Fannie Mae)

· High-Balance Loans – DU will include the 2009 high cost area loan limits

· Foreclosures – 5 year time period from completion date

· After 5 years up to 7 years from completion date

§ Principal residence purchase transaction - 90% LTV and min 680 FICO Score

§ Rate/Term refinances eligible (all occupancy types)

§ Cash out not allowed

· Deed in Lieu of Foreclosure – 4 years from completion date

· After 4 years up to 7 years from completion date

§ 90% LTV (all occupancy types)

§ Limited Cash out and cash out allowed (all occupancy types)

· Bankruptcies – Chapter 13

· 2 years from discharge date

· 4 years from dismissal date

· 4 years from filed when neither discharge or dismissed

· Bankruptcies –(All except Chapter 13) – 4 years from dismissal or discharge date

· Reserves for Investment Properties and Second Homes – DU will calculate the min 2 months reserves for second homes and six month reserves for investment property

· Two Unit Eligibility