Fannie Mae Implements Major Changes to Underwriting Guidelines

Fannie Mae successfully implemented the release of Desktop Underwriter® (DU®) Version 8.0 over the weekend of December 12, 2009. This release supports Announcement 09-29, Updates to Minimum Credit Scores, Mortgage Insurance, Pricing for Certain Desktop Underwriter Loans, Biweekly Loans, and Special Feature Codes, and other recent Announcements. 

Summary of Changes

• An update to the DU credit risk assessment
• An update to the maximum allowable total expense (debt-to-income) ratio to 45 percent, with flexibilities up to 50 percent for certain loan casefiles with strong compensating factors (not applicable to DU Refi Plus^TM)
• Retirement of Expanded Approval® (EA) EA-II and EA-III recommendations (except for DU Refi Plus loan casefiles)
• Minimum 620 credit score for delivery eligibility (not applicable to DU Refi Plus loan casefiles)
• MI updates:
  • A new minimum MI coverage option for DU and manually underwritten loans that will permit broad use of our lowest MI coverage level requirements, currently available only on a limited basis; a loan-level price adjustment (LLPA) will apply
  • Simplification of standard MI to be uniform across all products including Flexible mortgages and manufactured homes
  • Retirement of reduced and lower-cost MI and related variances
• Revised Minimum 620 credit score:
  • Increased from 580 (not applicable to DU Refi Plus) 
• Implementation of the high-balance mortgage loan eligibility guidelines specified in Announcement 09-08R and support of the 2010 high-cost loan limits specified in Announcement 09-34 
• Implementation of changes described in Announcements, including 08-16, 09-02, 09-19, and 09-28
• Product retirement and simplification:
  • Streamline MyCommunity Mortgage® (MCM®) special feature codes (SFCs) to a single code (460) 
  • Retirement of Biweekly product (lenders may still offer biweekly payment plans)

These changes are intended to ensure that our guidelines reflect and appropriately respond to current market conditions, and that we continue to provide sustainable homeownership opportunities to borrowers.