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Freddie Mac Going back to 45% DTI

By Dionne Bass

Education & Training with Ask The Underwriter Mentor/ Mtg. Underwriter

October 19, 2008 12:50 PM

Upcoming Changes to Freddie's Credit Requirements

These credit changes will be published in the November Guide Bulletin and will be will be effective for Freddie Mac settlements on and after February 2, 2009:

Eliminate purchases of all mortgages originated with stated income and/or stated assets, including borrower selected programs, lender-branded and marketed programs, and system-selected programs such as Loan Prospector® Accept Plus.

Establish a maximum debt-to-income ratio of 45 percent for all mortgages they purchase, except for Streamlined Refinance Mortgages.

They made a few other changes I will talk about later this week, but we expected the DTI to go back down didn't we?

Live FHA Training available in various states. We also offer instructor led on-line courses. If you are looking to learn technique and theory than contact Alpha Mortgage Training. Our Courses were written by a team of mortgage underwriters with a combined 58 years of conventional and government experience. Our courses will not only help you produce more effective loans, but they will also help you increase your closing ratio.

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George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

D. Bass good to see you back.

Going back to a 45 DTI would be a MAJOR CHANGE and will take a lot of Buyers out of the housing market. That is an over reaction in my opinion to what is going on. I could understand a 50 DTI, but 45 is a little overboard.

Oct 19, 2008 03:49 PM

Sharon Harris

Keller Williams Keystone Realty - Hanover, PA

Realtor

Wow things are going to be really tight. It is a good thing . However it is going to be tough for first time buyers to get into a home>

Oct 20, 2008 02:47 AM

Dionne Bass

Ask The Underwriter - Atlanta, GA

Blog: Ask The Underwriter

George- Thanks.....it's good to be back! I have to say as an underwriter I'm kinda glad they are tightening it back up. DTI's over 45% were for Sub-Prime only, when FNMA & Freddie tried to compete the trouble started.

Sharon-Hi Sharon, thanks for stopping by! I believe that it's not going to be tuff. It's going to be a buyers market for a while, but we will adjust as we always do.

Oct 20, 2008 01:01 PM

Anonymous

Mad Broker

Is McDonalds hiring?

Nov 14, 2008 07:05 AM

Bart

I am a Realtor and we have a first-time buyer scheduled to close Nov 25, 2008. The lender is concerned that the buyer might get kicked out under the new 45% DTI rule since he is at 49% now. My understanding is that the requirements become effective in early 2009, so shouldn't our buyer be in the clear since we're closing well before then? He has excellent credit and was approved no-problem under the current standards.

Nov 19, 2008 01:08 AM

Fred Chamberlin

Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA

Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Not really surprising change, as we all kind of expect, it is "Back to the Future" for underwriting.

Nov 19, 2008 05:00 AM

Mad Broker- You are FUNNY!

Bart- In a perfect world your borrower would be okay. Right now we really have no ground to stand on to answer that question in this market. The only thing you can do is stay on top of it. If they do change the approval before they close shoot me an email and we'll work on some compensating factors.

Fred- I agree with you! Underwriting is going "back to the future"!

Nov 19, 2008 11:37 AM

Frawg

I don't know what to make of the 45 max rule...

I just got notice from Metlife Home Loans that the new "conforming plus" (over 417k up to 625k) guidelines indicate a max DTI of 55% for loans over 80 LTV (MI still has its own restrictions), and a AUS determined (DU or LP) max DTI for loans under 80 LTV.

The email was brief, and didn't break down numbers by loan type. Could guidelines for "conforming plus" actually be looser than straight up conforming? It would be strange, to say the least...but this *is* a very strange time...

Nov 29, 2008 08:54 AM

Rodney Mason, VP of Mtg Lending

Guaranteed Rate NMLS# 2611 - Atlanta, GA

AL,AR,AZ,CA,CO,FL,GA,IN,MI,MS,NC,NV,SC,TN,TX,VA,WA

According to a Nov 24th Freddie Mac bulletin (http://www.freddiemac.com/sell/guide/bulletins/pdf/bll112408.pdf), the 45% max DTI only applies to manually underwritten loans. LP will still continue to determine the max DTI for AUS approved loans. The new effective settlement date is now March 1, 2009.

Dec 28, 2008 01:07 PM

Freddie Mac Going back to 45% DTI

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