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"Contingent Liability" Underwriting Guideline Change

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

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).

Posted by

George Souto
NMLS# 65149

C (860) 573-1308
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I am a Mortgage Loan Officer who can assist you with all your mortgage & refinancing needs in
CT, and RI

I can assist you with your Conventional,
FHA, CHFA, VA, USDA, & 203K loan programs.

I reside in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Haddam. E. Haddam, Higganum, Chester, Essex, Deep River.

 

Comments(15)

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Ch - Ch- Ch- Changes ... always taking place in our industry, George Souto.  We need to stay on our toes.  You help accomplish much by sharing this new info ..

Gene    

Feb 21, 2018 11:55 AM
Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

George, but everyone knows you guys do not do anything but get hand outs from agents...get a loan for my 650 FICO score buyer at the best rates... you mean you need to keep up with changes???Endre

Feb 21, 2018 11:22 PM
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thanks for updating us with this information, George.  I hope this will help some borrowers qualify for a good loan.

Feb 22, 2018 04:40 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

A topic that is rarely addressed, George... so thanks so much for the update!

Feb 22, 2018 06:55 AM
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

Important information that will help many people and the information you share, George, keeps us in the mortgage know!

Feb 22, 2018 02:19 PM
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

WOW! This is a great news flash and one agents and consumers need to be aware of. I hadn't heard about it before. This is so important too.

Thank you, George!

Feb 23, 2018 12:10 PM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

What an interesting but questioning the validity ..what happens if after  a few years if this person whose name is not on the note decides not to pay ..Has it's good and bad ... especially if the person is not on the loan . I can understand a co-signer . What are your thoughts George Souto ??????

Feb 24, 2018 02:38 AM
George Souto

Hannah that is a good question.  Underwriting decisions are based on past history and current conditions, to try to determine on what may occur in the future with information we have today.  For example there is no way of determining whether a borrower will continue to be employed, manage their fiances responsibly, or what market conditions will be. So decisions are made on what is, and not what may never happen.

Feb 24, 2018 09:00 AM
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Prop. Mgr, Wenatchee, WA

Hi George,
I'm glad we have you to keep us updated on this stuff! 

Feb 24, 2018 08:02 AM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning George - these changes should help some first time buyers.  You really keep us up to date.

Feb 24, 2018 08:16 AM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

This sounds like a positive change and will allow a few more buyers to qualify more easily.

Feb 24, 2018 10:15 PM
Roy Kelley
Retired - Gaithersburg, MD

Thank you very much for sharing this important information.

I hope you are enjoying a most productive month.

Feb 25, 2018 05:47 AM
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

That is outstandng information George Souto and we expect nothing less from you of course !

Mar 03, 2018 05:45 AM
Anna "Banana" Kruchten
HomeSmart Real Estate - Phoenix, AZ
602-380-4886

George this is awesome information - thanks for keeping us all in the loop.

Mar 03, 2018 10:19 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi George

It's always helpful to be updated on all the changes, but tough keeping up with them. That's what great loan officers like yourself are so essential!!

Jeff

Mar 04, 2018 08:12 AM
John Wiley
Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

George, it is not easy for us to keep up with all the changes. I appreciate you taking the time to update us. 

This is a change that has some great benefits to the buyer.

Thanks

Mar 06, 2018 07:12 AM