New Fannie Mae Guidelines -DU 9.2

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Mortgage and Lending with Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, NMLS #138061 MMCD #1141

New Fannie Mae Guidelines - DU 9.2

 

     There is a new version of Fannie Mae's automated underwriting system DU 9.2(AUS) coming out, and as of December 15 all new loan files packaged for Fannie Mae will be run through this new system (version 9.2).

 

     While most guidelines remain in effect, and this shouldn't really change many people's plans, there are a couple of changes worth noting.

 

Cash-out LTV reduction

 

     For primary residences, currently borrowers can do a cash-out refinance up to 85% LTV for a new fixed rate mortgage (75% for an ARM) on a primary residence.  With the system change, this LTV will be reduced to a maximum of 80%.

 

     I don't know why Fannie Mae is tightening the belt on this program considering nearly every other investor on the planet is slowly but surely getting more aggressive with guidelines - cash-out refinances seem to be bucking that trend, remaining pretty tight.  I don't think this is necessarily a bad thing, BUT Conforming loans really need to get on board with HUD guidelines when it comes to a "cash-out" mortgage that is simply a consolidation of a 1st & 2nd lien.  In my opinion, it makes a lot of sense to start viewing that type of transaction as a rate/term refinance so long as the 2nd lien isn't being used as an ATM.

 

 

New "message" for borrowers with more than 4 financed properties

 

     Yes, people can have more than 4 financed properties (you are working with a lender that's Fannie-direct, right?).  When a borrower has more than 4 financed properties, though, there are additional restrictions and guidelines that borrowers must meet to be approved.  Here's the catch -

 

     DU doesn't automatically issue "ineligible" findings when there's a potential problem.  In DU 9.2 there will be a "reminder" message to lenders that they need to manually ensure Fannie Mae guidelines are being met for these scenarios.

 

     Why is this important?  If your buyer has more than 4 financed properties, you'd better be working with a lender that knows their guidelines and has already covered their bases in making sure the borrower really qualifies.  Simply taking an application and running it through AUS isn't enough, even when AUS gives an approval.  Some loan officers are notorious for not reading the complete AUS findings, so I imagine more than one person will run into issues because they didn't read this message and receive an "Approve/Eligible" finding.

 

 

     Those are the only 2 changes I see having an impact on transactions. There are some minor message changes in the system but nothing that changes guidelines or how approvals are issued.  The big one is the cash-out restriction on primary residences - if you know someone with questionable equity and is looking for a cash out refinance, have them get the process started sooner than later. 

 

 

 

 

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Rainmaker
2,783,475
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

John, one thing we can all count on is a change in lending guidelines. Thanks for keeping us current on the changes and the changes that are coming. It sure is a lot to keep up with. I'm glad I don't have to keep all of this top of my mind ... that's why I have lending partner!

Oct 17, 2014 04:20 AM #1
Rainmaker
4,432,093
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for the information. I will bookmark this post.

Oct 17, 2014 04:26 AM #2
Rainmaker
1,496,282
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Hi John, thank you keeping us informed, there are always changes with lending guidelines.

Oct 17, 2014 07:15 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

Kathleen - thank you for the comment, I do my best but sometimes it's tough for me things change so quickly.

 

Gita - Glad you find the info helpful & thank you for commenting.

 

Beth - this is true, if I sent out updates for every change, even the "behind the curtain" ones, I wouldn't have time to do much else!

Oct 17, 2014 10:51 AM #4
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

John I think it is a mistake for Fannie to change the LTV requirement for cash-out refi's from 85% LTV to 80% LTV.  Property values in many parts of the country are still down, and this change will further restrict property owners from accessing the equity in their properties.  Fannie Mae needs to let the market do its job in stead of trying to artificially influence it.

Oct 17, 2014 01:07 PM #5
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Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

John, Cash out changes will affect some of my buyers because they use this to get funds to buy more properties. I do not understand this tightening up.

Oct 17, 2014 01:24 PM #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

George Souto I agree.  I wish they'd at least make a special exception for those simply consolidating liens.  I get the risk factor of cash out, but is there really a risk of closing an I/O HELOC to start building more equity?  I don't think so.

 

Debbie Reynolds that's a great point.  I don't see many investors doing that because of the PMI above 80 LTV, but I've known a few and this will definitely hurt them.  Not sure why they're NOW tightening up, unless they know something we don't.

Oct 17, 2014 02:01 PM #7
Rainmaker
2,250,139
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning John. I long ago stopped attempting to figure out how and why some of these guidelines change, but that is a constant for sure.

Nice job sharing the information.

Make it a great weekend!

Oct 17, 2014 08:43 PM #8
Rainmaker
1,570,074
David Saks
(retired) - Memphis, TN

Thanks for posting this great information. Have a terrific day ahead and a fine weekend.

Oct 18, 2014 01:10 AM #9
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