Fannie Mae Passes New, Tougher Mortgage Guidelines

Real Estate Agent with Coldwell Banker

Fannie Mae Passes New, Tougher Mortgage Guidelines


Fannie Mae is changing guidelines againGetting approved for a mortgage is about to get harder.

For the second time in less than 3 months, Fannie Mae announced changes to its mortgage guidelines. 

In its official announcement, Fannie Mae details the updates, meant to reduce the mortgage firm's overall risk.

The first major change is with respect to credit scoring.  All Fannie Mae loans -- whether underwritten electronically or manually -- require a 620 credit score minimum.  There are very few exceptions.

A second change relates to loans with private mortgage insurance.  Homeowners whose loan-to-value exceeds 80 percent now have a choice:

  1. Accept higher mortgage insurance premiums month-after-month
  2. Accept a one-time fee paid at closing to compensate for higher risk

Both options pass higher costs to consumers.

Then, a third change relates to maximum debt-to-income ratio.  As announced in a separate document, Fannie Mae will no longer approve expense ratios exceeding 45 percent except with very strong assets and credit to back it up.  In no case can expense ratios exceed 50 percent.

There are other changes, too, including the elimination of seldom-used mortgage products and new risk-based pricing on "expanded level" approvals.

Fannie Mae implements its updates during the weekend of December 12. 

Therefore, if you're going to need (or want) a new mortgage later this year, consider moving up your timeframe to October or November.  Once the guidelines change, getting approved for a mortgage is going to be tougher.

Comments (2)

Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

Lending is so seems to me that what they really need to do is bring on people who can evaluate risk. Actually look at a file and make a decision. I think we will ultimately end up without FICOS or at least a strong revision in how we look at the scores and more individual attention to the person applying.

Sep 29, 2009 03:09 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX


Thanks for the heads up!

I do have a question you say:  "Both options pass higher costs to consumers."  Is there ever a cost that isn't passed to the consumers?


Sep 29, 2009 03:16 AM