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New Fannie Mae (Conventional loan) Guidelines

By
Mortgage and Lending with Mortgages in AZ, CA, CO, DE, FL, GA, IN, MD, MN, MT, NC, NJ, NV, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI NMLS #138061 MMCD #1141

New Fannie Mae (Conventional) Guidelines

 

 

     Fannie Mae has announced some changes to their conventional lending guidelines, effective immediately.  This is a welcome announcement as the changes make underwriting guidelines more clear, and in some cases more lenient.  They also improve pricing for certain borrowers.  Have you had Fannie Mae Guideline Changesbuyers turned down over the past 6-12 months because of these guidelines?  If so, it's time to pick up the phone and see if they can qualify for a new home loan.

 

Keep in mind, these are Fannie Mae changes, and not lender-specific changes.  That means if your lender is not Agency-direct, you may run into delays with implementation or a lack of implementation of the following guidelines.  For this reason and many others, if you're not working with a lender that is agency-direct, you should be.

 

1) Debts paid by other parties

If a non-mortgage debt is paid by someone not applying for the mortgage loan, we can exclude that debt from debt/income ratios with evidence of the payment history.  Previously, we had to prove that our borrower was not obligated on the debt (in case of default).  This loosens up guidelines on which debts can be excluded, and should help a ton of people.  Some examples are:

 

- People who opened accounts for friends/relatives with poor credit, but those friends/relatives make payments

- Parents who cosign student loans or car loans but their kids pay them

 

 

2) Student Loan Refinance

If a cash-out refinance is used to pay off student loan debt, there are now no pricing hits or changes for cash-out refinancing.  Pricing will be the same as rate/term refinances.  In the past, regardless of which types of accounts were being paid off (with the exception of purchase money 2nd mortgages), there was an increase to interest rate (sometimes a steep one) for cash out refinances.  Now, provided the loan is just to pay off student loan debt, there will be no rate adjustment.  

Note** This program cannot partially pay off a student loan.  It has to pay the student loan in full

 

 

3) Less condo restrictions on refinances

Condo project approval is no longer required if:

 

- LTV is 80% or lower

- Project insurance is adequate and in compliance with Fannie Mae guidelines

- No time shares, segmented ownership, condotels, or houseboat projects

 

 

4) No seasoning on listed properties for cash out refinances

Previously, a listing had to be cancelled for 6 months before an owner could cash out to the max cash out limits of 80% LTV.  Now, there is no waiting period, we just have to show the listing was cancelled.

 

 

5) Student loan debt calculation changes

 

Lenders can now use the student loan payment shown on a credit report, OR if a credit report doesn't have a payment, 1% of the loan balance or a fully amortized payment based on repayment terms.  This will be nice for people with lower negotiated payments than 1% of the loan balance if they're shown on credit.  

 

     While these aren't huge changes, I can think of recent applications that would have been effected by at least one of the above.  The biggest one will be the change to debt/income calculations when debts are paid by non-borrowers, but all of these moves are a step in the right direction toward loosening the reigns on underwriting and moving to more common sense standards.

Posted by

John Meussner
NMLS ID #138061

It's more than a house - it's home.  So we offer a wide range of mortgage products at competitive prices to help our clients achieve financial security at home.  While we get great feedback on our prices and products, many clients say their favorite part of working with John Meussner & MasonMac is the level of service provided along the way.

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Comments (22)

Francine Viola
Coldwell Banker Evergreen Olympic Realty, Olympia WA - Olympia, WA
REALTOR®, In Tune with your Real Estate Needs

I'm so glad I saw this post...I was just talking with another agent about item #4!

Apr 25, 2017 05:36 PM
John Meussner

Good timing!  Glad I could help : )

Apr 26, 2017 01:47 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Thanks for keeping us up to date on these changes.  They can make a big difference to some borrowers.

Apr 25, 2017 08:29 PM
John Meussner

Sure thing Joan.  Knowing stuff like this can help get some additional transactions done

Apr 26, 2017 01:47 PM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Thanks for the new guidelines. You never know when one might need them. Good post! 

Apr 25, 2017 11:11 PM
John Meussner

Thanks Laura!  Exactly, you never know when you'll run into the scenario

Apr 26, 2017 01:47 PM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

These all sound like helpful changes for buyers. Thanks for sharing.

Apr 26, 2017 03:26 AM
John Meussner

Sure thing Kat, thanks for stopping by!

Apr 26, 2017 01:47 PM
Elyse Berman, PA
LoKation Real Estate - Boca Raton, FL
Boca Raton FL (561) 716-7824

John Meussner Great information in easy-to-understand language.  Thanks for sharing this information.

Apr 26, 2017 03:34 AM
John Meussner

Always happy to help Elyse Berman, PA, CRS , appreciate you stopping by

Apr 26, 2017 01:48 PM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

Great information about new Fannie Mae and conventional loan guidelines, John.

Apr 26, 2017 03:34 AM
John Meussner

Thank you, Myrl!

Apr 26, 2017 01:48 PM
Kim Knights
RE/MAX Bay to Bay - Tampa, FL

Good information.  Thank you.

Apr 26, 2017 04:08 AM
John Meussner

Thanks Kim, glad you find it helpful

Apr 26, 2017 01:48 PM
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Good morning John, thanks so much for sharing these important changes with us, we could always count on you!

Apr 26, 2017 04:33 AM
John Meussner

Absolutely Beth, and yes, always here when you need me!

Apr 26, 2017 01:48 PM
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Good news and thanks for sharing. It is good to see some lessened restrictions.

Apr 26, 2017 05:01 AM
John Meussner

Thanks Joe, and yes, glad to see things getting a little easier for once

Apr 26, 2017 01:49 PM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning John Meussner ,

So glad to see these new guideline's implemented immediately. I appreciate the heads up..inching and taking steps in the approval process that makes more sense!

Apr 26, 2017 05:24 AM
John Meussner

Totally agree Dorie...not huge strides, but any step in the right direction is a good one!

Apr 26, 2017 01:49 PM
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

The mouth of the Loan Officers horse speaking...aka the horses mouth here

Apr 26, 2017 06:14 AM
John Meussner

Hey!  Who you callin' a horse!? ; p


Thanks for stopping by Richie!

Apr 26, 2017 01:49 PM
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Eighteen Years Experience in Brevard County

Nice to know information.  Loan officers who know their stuff are critical.... as opposed to the loan officer who told my client yesterday no survey was needed unless the title company asked for one!

Apr 26, 2017 08:11 AM
John Meussner

Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC sounds like the lender is trying to cause an unnecessary delay to me!  That's what happens when people don't know how to work in the states they're licensed.  Happy to be of help!

Apr 26, 2017 01:50 PM
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

Those will all help John Meussner , thanks for the updates

Apr 26, 2017 08:29 AM
John Meussner

Thank you for stopping by, Scott!

Apr 26, 2017 01:50 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

John I got notice of these changes yesterday.  The change to debts paid by other parties, and the calculation of the student debt is going have a significant impact in my opinion.  Finally we are starting to see changes in a positive direction.

Apr 26, 2017 08:59 AM
John Meussner

I agree, those 2 will be the big changes.  It's nice that people who recently listed and decided not to sell will have some options to access their equity immediately, too.

Apr 26, 2017 01:51 PM
Mike Tizzano
LHM Financial DBA CNN Mortgage - Scottsdale, AZ
Full Service Mortgage Bank

This is where loosening of the guidelines makes sense.  Theoretically an IBR payment on a student loan payment would only increase if the borrower's income increased.  I understand that they have to renew the IBR annually but most people utilizing IBR go through with the renewal.

Apr 26, 2017 09:11 AM
John Meussner

Exactly, this will be a nice step in the direction of common sense

Apr 26, 2017 01:51 PM
Mick Michaud
Distinctly Texas Lifestyle Properties, LLC Office:682/498-3107 - Granbury, TX
Your Texas Lifestyle is Here!

Thanks for the heads-up.  Nice to see someone is starting to get a little more realistic in underwriting guidelines.

Apr 26, 2017 10:20 AM
John Meussner

Sure thing, Mick, and yes, after years of more restrictions, it's nice to see things moving back to a healthy balance.

Apr 26, 2017 01:51 PM
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi John - Thanks for the update. Those all look like they will be helpful to our borrowers.

Apr 26, 2017 12:59 PM
John Meussner

I think the changes will help quite a few folks, too!

Apr 26, 2017 01:41 PM
Christine Kankowski North SD and Temecula
House Match Inc - Poway, CA
Excellent Sales and Property Management

Great info. THanks for posting.   Rules change so quickly and often I rely on the wisdom of lenders like you. THanks, 

Apr 26, 2017 01:29 PM
John Meussner

Thanks for stopping by-  happy to keep you in the loop as our industry changes so frequently!

Apr 26, 2017 01:41 PM
Dorte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear John,

Great changes for those, who are a little challenged, but otherwise good borrowers.

Apr 26, 2017 09:19 PM
John Wiley
Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

John, this is great information for us to know. Often we are looking for a way to get  some folks qualified and knowing which lender has the product that will get the deal done is so valuable.

Thanks 

Apr 27, 2017 12:44 PM