New Fannie Mae Automated Underwriting (DU) Eligibility Changes.

Today Fannie Mae released Automated Underwriting (DU) Version 8.0 and these changes are bound to have a big impact especially on multi-family houses.  Some of the changes included in this release are as follows:

• Minimum FICO score 620 (was 580)
• 2 Unit Owner Occupied Property - maximum LTV 80% for purchase & rate/term refinance (was 90%)
• 2 Unit Owner Occupied Property - maximum LTV 75% for cash out refinance (was 85%)
• 2 Unit Investment Property - maximum LTV 75% for purchase & rate/term refinance (was 80%)
• Unit Investment Property - maximum LTV 70% for cash out refinance (was 75%)

In addition to the eligibility changes listed above, the updated version (DU 8.0) will limit the maximum allowable total expense ratio to 45 percent, with flexibilities offered up to 50 percent for certain loan case files with strong compensating factors.

If current debts exceed the maximum allowable total expense ratio, the loan case file will receive an Ineligible recommendation. DU will no longer return a Refer recommendation on loan case files that would have otherwise received an Approval, but had exceeded the maximum allowable total expense ratio.

All new cases submitted to DU will now be scored with the 8.0 version and the new eligibility will be applied. New cases submitted prior to today will be scored with the current version DU 7.1 and will continue to score as DU 7.1 on subsequent submissions, however, loans using DU version 7.1 must close by February 12, 2010.

I would STRONGLY recommend that if you have run a Borrowers file through DU before today, and received an Approved/Eligible, but the Borrower has not gone under contract yet, that you run it through DU again.  I am sure that there will be many Borrowers that received an Approved Eligible under version 7.1, that will no longer receive an Approved/Eligible under version 8.  It would be a shame to have a Realtor that you partner with run around trying to find one of their Buyers a house, and the Buyer no longer qualifies.

If you are a Realtor or a Buyer I would again STRONGLY recommend that you contact the Loan Officer or Broker that you are working with and ask them to run your file(s) through DU to make sure that you have not been affected by this change. 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, andConventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com