Are You Ready for Change?

By
Mortgage and Lending with Canopy Mortgage, LLC NMLS 124492

Can you feel it? Can you hear it? Can you see it?

I am not talking about the weather or Barack Obama.

During the weekend of December 13th, major updates were implemented by Fannie Mae (FNM) that will influence home financing for years to come. These updates are a game changer and will have an impact for homeownership and the wealth affect.

All the updates, which encompasse a plethora of underwriting guideline changes, are to FNMs automated underwrite system (aka. Desktop Underwriter/Originator) that all consumers are required to be processed through for both agency and FHA insured mortgage products.

FNMs Desktop Underwriter (DU) is now called DU Version 7.1. Any automated approvals that have a prior DU Version will be scrutinized and potential denied per new guidelines.

The biggest change came in the form of loan-to-value (LTV) eligibility requirements. LTV simply references how much equity one would have either from a down payment or home price appreciation. Let's review some of these changes.

Principle Residence:

  • 75% max LTV for purchase on 3-4 unit.
  • 85% max LTV for cash-out on single family residence.

Second Homes:

  • 90% max LTV for purchase on single family residence.
  • 90% max LTV for rate/term refinance on single family residence.
  • 75% max LTV for cash-out on single family residence.

Investment Properties:

  • 85% max LTV for purchase on 1-2 unit.
  • 75% max LTV for rate/term refinance on 1-2 unit.
  • 75% max LTV for cash-out refinance on 1-2 unit.

Another update that went under the radar was a  Bankruptcy Policy Change. Specifically, the minimum allowable time period between the file date of a bankruptcy will be extended from 24 months to 48 months.

This will be disheartening for consumers who were able to buy a home several years ago at one day out of bankruptcy and will have no option to refinance due to guideline changes. It will also make it more difficult for buyers who have to seek shelter through the bankruptcy courts during this historic economic downturn.

Ready or not, change is here.

Posted by

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Looking for more specific real estate and mortgage advice for Northwest Indiana and/or the greater Chicago land area please visit my Welcome Home NWI website at www.WelcomeHomeNWI.com.

Need more expert advice? Call, text or email. Contact James Barath at GVC Mortgage, Inc.

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Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

These are important changes with lots of potential ramifcations that I'm uncertain all are aware of.

Dec 16, 2008 10:16 AM #1
Rainer
70,975
James K Barath, CMPS
Canopy Mortgage, LLC - Crown Point, IN
FICO Pro, Certified Military Housing Specialist

Christine,

Now you know why I felt that it was important to let people know what is going on in the background. These updates definitely have changed how we play this game of real estate.

Dec 16, 2008 10:23 AM #2
Rainer
76,071
Melissa Breeland
Residential Mortgage of SC - Charleston, SC

Thanks. Good info..I need to get my CMPS designation now too. You inspire me!

Melissa "The Mortgage Maven" Breeland  

Dec 16, 2008 10:42 AM #3
Rainer
70,975
James K Barath, CMPS
Canopy Mortgage, LLC - Crown Point, IN
FICO Pro, Certified Military Housing Specialist

Melissa,

I am glad that I could be of inspiration to you. Let's collectively make our industry stronger. Here's to OUR success!

Dec 16, 2008 11:06 AM #4
Rainmaker
400,678
John Cannata
214-728-0449 http://TexasLoanGuy.com - Frisco, TX
Texas Home Mortgage - Purchase or Refinance

I think many do not really know what is coming.  There are quite a few requirement changes that will effect how someone is approved.  I'm personally interested in how strict the lenders will be with the new DTI requirement.

Dec 16, 2008 12:19 PM #5
Rainer
70,975
James K Barath, CMPS
Canopy Mortgage, LLC - Crown Point, IN
FICO Pro, Certified Military Housing Specialist

John,

I am not that concerned about lenders, I am more concerned about how Congress will shove more stringent DTI requirements down banks throats with the imminent threat of streamlined & judicial loan modifications.

Dec 16, 2008 01:39 PM #6
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James K Barath, CMPS

FICO Pro, Certified Military Housing Specialist
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