Mortgage Guideline Changes for Fannie Mae
If we didn't know better we might think the mortgage industry guidelines [http://mortgageloanfacts-u-need.blogspot.com/2010/10/mortgage-banking-news-flash.html] were getting back to the 90's when all loans were scrutinized for their ability to perform in a more efficient way than what occurred in the 2000 + years. FHA is tightening down on all guidelines, as well as Fannie and Freddie. Please note that FHA, Fannie and Freddie make the guidelines which the lenders use to submit loans to them; they do not make the actual loan.
Independent Mortgage Bankers and lenders are also tightening up their guidelines so that they do not have to buy loans back from the agencies after they have been through quality control of the agencies or when the loan starts to be delinquent. These lenders, who actually make the loans, furnish the money to close and fund the loan; have started raising their minimum credit score requirements, especially on FHA loans. Some of the big ones, Bank of America, Wells Fargo and J P Morgan Chase have raised their minimum credit score for FHA to 640. Okay, we will say that this is not a bad move from where we are sitting. At least from where this writer sits.
Here is why. When a person has a large number of issues on their credit, something somewhere has gone wrong, usually. If their score is correct, meaning truly represents the information on their credit, it is then hardly likely the prospective borrower's habits will change. There are times when derogatory information is sent to a person's credit report which is not their accounts, or co-signed loans or just plain incorrect information and the scores are affected; then that is another story and the incorrect information can be cleared up and a loan can be underwritten with the corrected information. However, if a person has been delinquent on all obligations which are not isolated within a certain period of time; it is not wise to believe that it will be any different in making their house payment. This may sound somewhat hard, but it has been evidenced time and time again by people who just do not understand the importance of making their credit obligations in a timely manner.
The lenders can have their own guidelines as well as those they must comply with of the investors such as Fannie, Freddie and FHA/VA. So, this is what that amount to as they feel they are lessening their ability to make loans that will not perform.
Fannie Mae is retiring the Flex 97% loan product which allowed first time homebuyers especially to get loans that did not require the 5% down payment from their own funds. In lieu of this program; they are expanding their standard guidelines to include 97% financing of these loan to values for a purchase or refinance, 1 unit dwelling, which are owner occupied. This will not happen for high-balance loans (those over and above $417K). These loans must be put in their automated underwriting system (DU) for a preliminary approval. A manual underwritten loan will not be allowed.
**There may be other restrictions which may not be mentioned here and anyone seeking a Fannie Mae 97% loan should check with their lender for all guidelines.
Source of funds:
Fannie Mae will allow a flexible source of funds for 1-4 unit, owner occupied, dwellings with loan to values less than < 80% without regard for the minimum investment from their own funds of 5%. Loan to values greater than >80%; will be allow only for 1 unit only- single family dwellings, owner-occupied and will not cover high balance loans.
2-4 units dwelling must have a 5 % down payment (3% for My Community Mortgage) from their own funds; anything over and above 5% may come from flexible funds source.
The flexible source of funds for the above is gifts, grants from entities, employer contributions and community seconds.
Independent Mortgage Bankers and lenders are also tightening up their guidelines so that they do not have to buy loans back from the agencies after they have been through quality control of the agencies or when the loan starts to be delinquent. These lenders, who actually make the loans, furnish the money to close and fund the loan; have started raising their minimum credit score requirements, especially on FHA loans. Some of the big ones, Bank of America, Wells Fargo and J P Morgan Chase have raised their minimum credit score for FHA to 640. Okay, we will say that this is not a bad move from where we are sitting. At least from where this writer sits.
Here is why. When a person has a large number of issues on their credit, something somewhere has gone wrong, usually. If their score is correct, meaning truly represents the information on their credit, it is then hardly likely the prospective borrower's habits will change. There are times when derogatory information is sent to a person's credit report which is not their accounts, or co-signed loans or just plain incorrect information and the scores are affected; then that is another story and the incorrect information can be cleared up and a loan can be underwritten with the corrected information. However, if a person has been delinquent on all obligations which are not isolated within a certain period of time; it is not wise to believe that it will be any different in making their house payment. This may sound somewhat hard, but it has been evidenced time and time again by people who just do not understand the importance of making their credit obligations in a timely manner.
The lenders can have their own guidelines as well as those they must comply with of the investors such as Fannie, Freddie and FHA/VA. So, this is what that amount to as they feel they are lessening their ability to make loans that will not perform.
Fannie Mae is retiring the Flex 97% loan product which allowed first time homebuyers especially to get loans that did not require the 5% down payment from their own funds. In lieu of this program; they are expanding their standard guidelines to include 97% financing of these loan to values for a purchase or refinance, 1 unit dwelling, which are owner occupied. This will not happen for high-balance loans (those over and above $417K). These loans must be put in their automated underwriting system (DU) for a preliminary approval. A manual underwritten loan will not be allowed.
**There may be other restrictions which may not be mentioned here and anyone seeking a Fannie Mae 97% loan should check with their lender for all guidelines.
Source of funds:
Fannie Mae will allow a flexible source of funds for 1-4 unit, owner occupied, dwellings with loan to values less than < 80% without regard for the minimum investment from their own funds of 5%. Loan to values greater than >80%; will be allow only for 1 unit only- single family dwellings, owner-occupied and will not cover high balance loans.
2-4 units dwelling must have a 5 % down payment (3% for My Community Mortgage) from their own funds; anything over and above 5% may come from flexible funds source.
The flexible source of funds for the above is gifts, grants from entities, employer contributions and community seconds.
Source...