Fannie Mae and Freddie Mac have been very busy lately revising their
policies to reflect current market conditions. I wanted to notify you as to
the major changes that you will see as a result of these modifications.
Most of the effective dates for these changes will be June 1, 2008.
FNMA - Announcement
Acceptable Elapsed Time since Foreclosure
FNMA currently requires four years to elapse after a foreclosure before they
will consider the borrower to have a re-established credit history. With
this Announcement, they are increasing that time period to five years. They
will continue to allow a lesser time period to elapse (three years in lieu
of the current two-year requirement) for borrowers who can demonstrate
documented extenuating circumstances that resulted in the foreclosure
action; financial mismanagement is NOT an extenuating circumstance.
Elapsed time is measured by comparing the application date of the new
mortgage to the completion of the foreclosure action as reported on the
credit report or other foreclosure documents provided by the borrower.
After the requisite five year elapsed time period.
The borrower may obtain a new mortgage to purchase a principal residence
with a minimum 10 percent down payment and a minimum credit score of 680.
The borrower may obtain a limited cash-out refinance mortgage pursuant to
our eligibility requirements in effect at that time.
The borrower may not obtain a cash-out refinance or obtain a mortgage
secured by a second home or investment property for seven years after the
foreclosure action.
Loans with Excessive Prior Mortgage Delinquencies
Loans with excessive prior mortgage delinquencies will not be eligible for
delivery to Fannie Mae. Excessive prior mortgage delinquency is defined as
any mortgage trade line that has one or more 60-, 90-, 120-, or 150-day
delinquency reported within the 12 months prior to the credit report date.
FHLMC - Announcement
Second Home and Investment Property Purchases/Refinances
* For new Second home Mortgages with Freddie Mac on or after this
date, a Borrower may not own more than four 1- to- 4-unit properties that
are financed, including the subject property.
* For new Investment Property Mortgages with Freddie Mac on or
after this date, a Borrower who owns more than one financed Investment
Property may not own more than four 1- to 4-unit properties that are
financed, including the subject property
* For Cash-Out refinance Mortgages with Freddie Mac on or after
this date, the Borrower must own the property for at least six months prior
to the Note Date of the refinance Mortgage
Congressional Updates
My trip to Washington DC a few weeks ago was quite a wild ride in terms of
lobbying for mortgage reform. I was able to attend the House Financial
Services Subcommittee Hearing on Foreclosures and Loan Servicing chaired by
Rep. Maxine Waters (D-CA) and upon the return to the hotel was greeted by
protesters bused in from PA and MA.
We were also able to meet with the offices of all 9 Arizona congressional
delegates from Arizona, and the resounding argument was no longer based upon
Republicans versus Democrats but more so House versus Senate.
As the House Financial Services Committee Chairman Barney Frank (D-MA)
continues to propose and pass Bills focused on the mortgage crisis, the
Senate has definitely taken their time to make sure the Bills that they pass
do not include "hanger-on" language that will muddy the Bill's original
intent. The two chambers are still in a dead-lock on coming to an agreement
as to FHA Modernization Bill that was approved through both the House and
Senate through respective bills at the end of 2007 and locked in conference
committee over disagreements of loan limit increases for FHA as well as
down-payment requirements. It is important to remember that is FHA
Modernization is not passed soon, the temporary increases to loan amounts
for FHA will expire on December 31, 2008.
Rep. Frank continues his path of "if it moves regulate it" as he cleared his
"rescue plan" legislation through committee this past week. This bill is
expected to be the vehicle through which an even larger housing/tax package
will be considered by the House, possibly including even another attempt to
push FHA Modernization and GSE Regulatory Reform over the finish line.
With a relatively short time frame for Congress to complete their work in
this election year, this week's action in the House may mark the beginning
of the end game for a 2008 legislative response to the problems in the
mortgage and credit markets.
I have also included a photo from one of our meetings. Rep. Jeff Flake is
the delegate from District 6 which includes parts of Mesa and Chandler and
all of Gilbert, Queen Creek, and Apache Junction. Jeff serves on the
Committee on Foreign Affairs and the Committee on Resources.
Amy Swaney, CMB
Vice President
Artisan Mortgage
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