Three weeks ago I wrote a blog "FHA Approvals" about how it looked like FHA was loosening up on the Debt-To-Income Ratio's, and that I would be keeping an eye on it to see if that was really the case.  Well it is now three weeks later, and in that time I have had five more Borrowers that received an Approved/Eligible through  Automated Underwriting (DU) with ratio's around 42+ on the front/top ratio and 55+ on the  back/bottom ratio.

This is enough to convince me that FHA has made an adjustment to the level of risk that they are willing to accept on loans in the last month.  This can be viewed as good, in that during a time that we are trying to stimulate the Real Estate Market, this should have an impact on increased sales. But it could just as easily be viewed as bad, because it is stretching the purchasing power of Borrowers.

Fannie Mae is also expected to make further adjustments to their Automated Underwriting System (DU), the first week of May, to take into account the new criteria of the new Refinancing Plan that was past earlier this year by the Obama Administration, "DU Refi Plus Program" which I also wrote about earlier last month. What we do not know is if Fannie Mae is tweaking DU in any other way at the same time.  But I guess we will find out soon enough once we start running new loans through it next month.

There are still Lots of changes going on as you can see, and only time will tell if they are for the better or for the worst.  But one thing is for certain, it is now more important then ever before to make sure that every Borrower is aware of what they are committing to.  It is important to not just qualify them for a loan, but to also make sure that they fully understand what financial risk they are taking on.  It is one thing for me to receive an Approved/Eligible from DU based on the information that it sees.  But what a Borrower can truly afford maybe very different. it could be completely different thing for Borrowers to access how that monthly payment is going to affect their lives.

Neither I nor DU knows what their life style is like, or what other obligations that they might have that do not show up on their Credit Report, only they know that, and they need to access how a monthly payment is going to affect and impact their lives.

It is my responsibility to give them all of the information that they will need to understand the decision that they will need to make. but the final decision and responsibility for the financial obligation that they are about to make is theirs.  I can advise them, but I can not make the decision for them, nor would I attempt to.  I expect people to respect me enough to let me make my own decisions once they have given me the information that I need to make a decision, so I need to respect others in the same way.

Some will disagree with that, and that is OK, this would be a pretty boring world if everyone agreed with me.  That is one of the beauties of this great country of ours, we have the right to have our own opinions, make our own mistakes.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com