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New Fannie Mae Automated Underwriting (DU) Eligibility Changes.

By George Souto

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

December 12, 2009 01:54 PM

Today Fannie Mae released Automated Underwriting (DU) Version 8.0 and these changes are bound to have a big impact especially on multi-family houses. Some of the changes included in this release are as follows:

Minimum FICO score 620 (was 580)
2 Unit Owner Occupied Property - maximum LTV 80% for purchase & rate/term refinance (was 90%)
2 Unit Owner Occupied Property - maximum LTV 75% for cash out refinance (was 85%)
2 Unit Investment Property - maximum LTV 75% for purchase & rate/term refinance (was 80%)
Unit Investment Property - maximum LTV 70% for cash out refinance (was 75%)

In addition to the eligibility changes listed above, the updated version (DU 8.0) will limit the maximum allowable total expense ratio to 45 percent, with flexibilities offered up to 50 percent for certain loan case files with strong compensating factors.

If current debts exceed the maximum allowable total expense ratio, the loan case file will receive an Ineligible recommendation. DU will no longer return a Refer recommendation on loan case files that would have otherwise received an Approval, but had exceeded the maximum allowable total expense ratio.

All new cases submitted to DU will now be scored with the 8.0 version and the new eligibility will be applied. New cases submitted prior to today will be scored with the current version DU 7.1 and will continue to score as DU 7.1 on subsequent submissions, however, loans using DU version 7.1 must close by February 12, 2010.

I would STRONGLY recommend that if you have run a Borrowers file through DU before today, and received an Approved/Eligible, but the Borrower has not gone under contract yet, that you run it through DU again. I am sure that there will be many Borrowers that received an Approved Eligible under version 7.1, that will no longer receive an Approved/Eligible under version 8. It would be a shame to have a Realtor that you partner with run around trying to find one of their Buyers a house, and the Buyer no longer qualifies.

If you are a Realtor or a Buyer I would again STRONGLY recommend that you contact the Loan Officer or Broker that you are working with and ask them to run your file(s) through DU to make sure that you have not been affected by this change.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, andConventional 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

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George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Jenny they certainly are.

Donna thank you. I try :)

Chris, FHA will continue to be an option for multis, but who knows how long it will be before they will also begin to tighten things up also.

Stephanie, I will continue to try to do my best to pass on what I know.

Eric, refinances are certainly not an easy option any more, and they continue to make them tougher.

Dec 13, 2009 01:38 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Missy yes I do think that it will slow things down, especially in areas that FHA is not a real option. VA and USDA are still 100% financing options, but those are not available to everyone.

Bryant, I know you have good people that you work with for you financing, and that they will stay on top of the changes for you. We need to know the rules, and what our options are within them more so these days than any other time that I can ever remember before.

Christine, those who have loans in processing should be OK, it is those that have not found a house yet that could have problems with this change.

Bill as always you are very welcome.

Gene unfortunately you are right about that.

Dec 13, 2009 01:51 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Tony yes I have noticed the pattern and now the DTI will also start to become more of a pattern as well.

Aaron, these are a lot different for multi family properties, especially for two family units. The Total Debt to Income Ratio droping to 45% is also huge. Previously you could get a DU Approved/Eligible on a Fannie Mae backed loan with a Total Debt to Income Ratio of 57%

Terrylynn, yes it does. We are going to have to pay very close attention to this one.

John the problem with this change is that many previously qualified Buyers will no longer be qualified under these new changes. The change to the Total Debt to Income Ratio will take a lot of people out of the market.

Steve you are right, and by the way I like the new Christmas get up :)

Dec 13, 2009 02:03 PM

Monique Combs

Royal Shell Real Estate - Bonita Springs, FL

Royal Shell Real Estate - Monique Combs

George ~ Thank you for such an informative post New Fannie Mae Automated Underwriting (DU) Eligibility Changes.

Dec 13, 2009 02:22 PM

Todd Clark - Retired

eXp Realty LLC - Tigard, OR

Principle Broker Oregon

We are the government we are here to help.. AHHHHHH! Why is the government keep trying to improve things. All I see is it trying to stop any housing recovery.

Dec 13, 2009 02:36 PM

Roland Woodworth

Blue Cord Realty - Clarksville, TN

Blue Cord Realty

Thanks for the update George. Things are changing more often these days and this will help keep up.

Dec 13, 2009 02:41 PM

Wendy Rich-Soto, Realtor/Broker Associate

Keller Williams Realty, LA Harbor - San Pedro, CA

Getting you to your next with a zero failure rate!

George,

Thank you so much for keeping us aware of the guidelines and how they will affect buyers in the market place! ;-)

Dec 13, 2009 04:07 PM

Diane Rice

Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - Lansing, IL

SFR, SRES, CNC

George, i have been all over Active Rain, trying to reciprocate all those comments left on my fetured blog and i must have run into about 30 re-blogs of your post!!! Look at how valuable folks deem you and what you have to share! Have a great Holiday George... thanks for all you have been all year round!

Dec 13, 2009 07:10 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Monique, I am glad that you found the information useful.

Todd, you are right these changes will slow down the housing recovery, and will take Buyers out of the market.

Roland, there are more to come and I will try to post about them.

Wendy, many of the people here in the Rain try to do that, and we all learn from one another.

Diane, thank you, but I am just the messenger, it is the information that is of value. But it is always good to hear what you had to say :) :) :)

Dec 13, 2009 11:08 PM

ReShawna Leaven

KW United | Alexandria/Kingstowne - Oxon Hill, MD

Experience. Knowledge. RESULTS.

George, Thanks for the update very informative post!

Dec 14, 2009 12:12 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Reshawna thank you, I just wish it could be better news :)

Dec 14, 2009 02:36 AM

Ilyce Glink

Think Glink Media - Chicago, IL

Best-selling author, award-winning TV/radio host.

Thanks for the update and helping to make sure we're all on top of these changes. It can be hard to keep track with so many changes happening so fast. I've been writing about the FHA changes quite a bit as well for my CBS MoneyWatch blog.

http://moneywatch.bnet.com/saving-money/blog/home-equity/shaun-donovan-fha-needs-to-change/1342/?tag=col1;blog-river

Dec 14, 2009 03:21 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Ilyce, the changes have been coming on a regular bases, and that trend will probably continue for a while longer before they are done tightening things up.

Dec 14, 2009 10:13 AM

Ann Hayden 636-399-7544

Berkshire Hathaway HomeServices Select Properties-St. Louis Missouri - Des Peres, MO

SelectAnn.com

George,

All the changes are going to push some people right out of the market... Or as you said, waste someone's time.

Thank you for the post. I am going to re-blog it.

Ann Hayden in Wildwood, MO

Dec 14, 2009 12:44 PM

Marchel Peterson

Results Realty - Spring, TX

Spring TX Real Estate E-Pro

George, I knew the changes were coming but I was not sure what they were. Thanks for sharing.

Dec 14, 2009 01:57 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Ann, especially the decrease to a 45% Total Debt to Income Ratio is going to eliminate a lot of Borrowers.

Marchel, well now you know what a few of them are :) :)

Dec 14, 2009 10:51 PM

Celeste "SALLY" Cheeseman

Liberty Homes - Mililani, HI

(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

Stricter rules....can't decide if it's a good thing or not. It may bring well qualified borrowers/buyers but it may push out the ones who really are responsible and can make their payments faithfully.

Dec 15, 2009 03:03 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Sally in my opinion this is not good, because it is going disqualify a lot of buyers that qualify right now. The way I look at it is, fewer Buyers equals fewer sales and that is not good in a time that we NEED to increase sales. I do not see how this will help turn the economy around.

Dec 16, 2009 03:34 AM

Ray Saenz

Exit Realty Laredo - Laredo, TX

Homes for Sale in Laredo, TX - Texas, Realtor

George,
I heard long time ago that they would change to 640 minimum fico score, I believe that they never approved or or just was a rumor, great info, thx

Dec 16, 2009 05:29 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Ray FHA has not done that, but Investors that buy the loans have put their own risk layers dictating what Credit Scores they will accept. Most of them are at 620, but a few are requiring a 640 or higher.

Dec 17, 2009 06:11 AM