I received the "Contingent Liability" Underwriting Guideline Change below from our Underwriting Department earlier this week.
"Both Freddie Mac & Fannie Mae have aligned to similar guidelines so that we can now exclude installment (non-mortgage) & revolving debt from the liabilities when another party is paying the debt with both agencies. The party paying does not need to be obligated on the debt and installment debts include liabilities such as leases, student loans & alimony/child support payments.
They have also both aligned to let mortgage debt be excluded from the DTI without it being court ordered as long as the party making the payments is obligated on the note for the mortgage that is being excluded. (Freddie Mac the borrower needs to be removed from the title for the mortgaged property).
*In order to exclude non-mortgage or mortgage debts from the borrower’s DTI ratio, the lender must obtain the most recent 12 months canceled checks (or bank statements) from the other party making the payments that document a 12-month payment history with no delinquent payments. The other party making payments cannot be an interested party."
This has always been a possibility for "contingent liabilities" with two borrowers, but now with this change the person making the payments does not need to be one of the borrowers in order for the payment to be eliminated from the borrowers Debt-To-Income Ratios (DTI).
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