Fannie Mae has announced changes to their underwriting guidelines, refinance seasoning
requirements, multiple mortgages to the same borrower and the manner in which borrowers are qualified when purchasing a new principal residence when their current principal residence is pending sale.
Seasoning Requirements - Fannie Mae has established seasoning requirements for refinance transactions that mirror those of Freddie Mac. Properties owned less than 6 months preceding the application for refinance are ineligible for cash out refinance transactions. The ownership date is considered to be the date of the deed of the current mortgage.
No Outstanding Liens - For properties purchased between 6 -12 months preceding application date the LTV must be based on the lesser of the original sales price or current appraised value. Properties purchased more than 12 months prior to application date may use the current appraised value.
Properties Listed for Sale - The maximum LTV for cash out refinance transactions on properties that were listed for sale within the last 6 months is limited to 70%. Evidence that the property was taken off the market must be in the file. For no cash out transactions, the LTV remains the same as current policy if the borrowers confirm their intent to occupy the property as their primary residence and provide a confirmation of the listing withdrawal.
Continuity of Obligation - Refinance transactions that include a borrower that is on title, but not currently obligated on the note being satisfied may now be treated as either a cash out or no cash out transaction, depending on the program guidelines. Continuity of obligation exists if the borrower has been on title and residing in the property for the 12 months preceding application, and has either paid the mortgage for the past 12 months, or can evidence a relationship with the current obligor. Property in an LLC - continuity of obligation also exists if the title to the property was held in the name of an LLC, as long as the borrower was a member of the LLC prior to transfer of title. Title must be in the name of the borrower at the time of application. Transfer of ownership from a corporation does not constitute continuity of obligation. Guidelines for transfer of ownership through divorce or inheritance remain the same as current policy. Where no continuity of obligation exists, but the borrower has been on title for at least 6 months, the maximum LTV is limited to 50% and is based on the current appraised value.
Multiple Mortgages to the Same Borrower - For loans on second homes or investment properties, the limit on the number of properties that the borrower has either joint or sole ownership in is being reduced from ten (10) to no more than four (4) financed properties. LAST DAY TO REGISTER LOANS WITH 4+ PROPERTIES IS SEPTEMBER 26th!
Principal Residence Pending Sale - If the borrower is purchasing a new primary residence and their current residence is listed for sale, the borrower must be qualified using both the current and proposed mortgage payments, and the borrower must have 6 months reserves for both properties. Only 2 months reserves is required if the borrower can evidence at least 30% equity in the residence being sold. The borrower may be qualified using only the proposed payment if they can provide evidence that the property is under contract for sale and that there are no financing contingencies remaining. The minimum reserve requirement does not apply to loans underwritten through DU. DU will determine the amount of reserves required.
Short Term Refinance - A refinance that combines a first mortgage and a non purchase subordinate lien into a new first mortgage is considered a cash out transaction. Any refinance of that mortgage within 6 months will also be considered a cash out transaction.