Fannie Mae post-shortsale guidelines changing

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Mortgage and Lending with Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, NMLS #138061 MMCD #1141
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Fannie Mae post-shortsale guidelines changing

 

 

     With the updated release of Desktop Underwriter (DU)  to version 9.1, Fannie Mae Short Sale GuidelinesFannie Mae has implemented some changes to  the automated underwriting system, which should be followed by changes to their selling guide, and therefore the guidelines of every lender in the industry that underwrites conventional loans.

 

 

 

The pertinent changes are:

 

Foreclosure with less than 7 years seasoning (good news)

 

     If a borrower has had a foreclosure withing the previous 7 years from the date of application, it will now be possible to receive an approval through automated underwriting IF the foreclosure was a result of extenuating circumstances.  Previously, these files would have to be downgraded to manual underwriting, which more often than not meant a rejection.  With an automated approval, files have a much better chance of making it to the closing table.  It is important to note that an automated approval will only be possible in the event of major extenuating circumstances, which will need to be documented.

 

Charged off Mortgages (meh, not really news)

 

     If a mortgage is reported as charged off on a borrowers credit, that borrower will need to wait 4 years to obtain a mortgage eligible for sale to Fannie Mae.

 

 

Getting a Mortgage Post-Short Sale (not good news)

 

     With the release of DU version 9.1, post-short sale guidelines are the most drastic change we'll see.  Fannie Mae is getting rid of their seasoning/LTV scale and implementing a policy that will require borrowers to wait 4 years after a short sale to obtain a new mortgage.  Previously, a borrower could obtain a new mortgage 2 years after a preforeclosure sale with 20% down.  The good news is that the 20% down requirement is gone, but the bad news is that the waiting period will now be 2 years longer.  In the event that extenuating circumstances caused the preforeclosure sale, the waiting period is 2 years.

     This rule change applies to all preforeclosure sales, whether they be short sales or deed-in-lieu.  Hopefully, portfolio lenders and private investors will still be able to accomodate financing for those with less than 4 years seasoning on preforeclosure sales, but conventional financing will no longer be an option, so chances are things will be tougher for those with recent short sales.

 

 

     All of these rule changes are for DU casefiles submitted OR resubmitted to automated underwriting on or after the weekend of August 16, 2014.  With the "Or resubmitted" verbiage in play, it's important to ensure any borrowers that need to get a loan under the old parameters (2 years seasoning with 20% down or 4 years seasoning with 10% down) close on their loan prior to the August 16 weekend.

 

 

Need a mortgage loan that will close FAST?  Call me at 484.680.4852 to get started.  Our turn around times average just a couple of weeks from application to close!

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Ambassador
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

John   Thanks for the update  ,These facts are very interesting

Jul 07, 2014 07:12 AM #1
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

John that is good news for Short Sales, but how is DU going to be able to know there were extenuating circumstances?  I don't know presently of any to provide DU with that information, which is why it needed to be a manual underwrite.  Are they now providing a method that information can be inputted in DU?

Jul 07, 2014 09:21 AM #2
Rainmaker
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Wayne and Jean Marie Zuhl
Samsel & Associates - Clark, NJ
The Last Names You'll Ever Need in Real Estate

Hi John,

Thank you for posting this. It's so important to stay up to date on the current requirements.

Jul 07, 2014 11:39 AM #3
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Hannah - thanks for the comment, hopefully sharing the news helps someone!

 

George - from my understanding we'll have the option to put a code into the automated underwriting system in the declarations section. 

 

Wayne & Jean - thanks for stopping by, and not a problem, always trying to keep AR informed about what's going on in the lending side of things.

Jul 07, 2014 11:51 AM #4
Rainmaker
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Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thnak you for the information. I will bookmark this and share with others.

Jul 07, 2014 08:00 PM #5
Anonymous
Sharon Stone

Does the 4 year waiting period include those who have already waited 2 years and could qualify right now?

Jul 15, 2014 05:34 AM #6
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Thanks Gita, glad you found the info useful!

 

Sharon - If someone has been past short sale for 2 years, they can get a conventional loan right now w/20% down, but they'll need to move fast.  Once the new guidelines come into play, the waiting period will increase to 4 years.

Jul 15, 2014 07:47 AM #7
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