Fannie Mae recently issued Selling Guide Announcement SEL-2015-10, dated September 29, 2015, which outlines some policy and programmatic changes for Lenders awareness.
Fannie Mae’s Selling Guide has already been updated to include these changes which involve a product for lower-income Borrowers and favorable underwriting changes to high-balance loans. The most notable changes are as follows:
- Introduction of the “HomeReady Mortgage” – Borrowers’ income is limited to 80% of the area median income and up to 100% for properties located in high minority census tracks or designated disaster areas. Borrowers do not need to be first-time homebuyers if the property is a one-unit, principal residence with LTV ratios greater than 95% up to 97% and underwritten through Desktop Underwriter (DU).
- Homeownership Education & Housing Counseling – the Selling Guide now distinguishes between mandatory homeownership education to be completed prior to loan closing (as part of HomeReady) and optional housing counseling provided by an HUD-approved counseling agency. At least one borrower on each HomeReady mortgage must complete the “Framework Homeownership” online homeownership education program and, if an on-line course is not appropriate, completion of homeownership education by a HUD-approved counseling agency.
- High-Balance Mortgage Loan Eligibility – Fannie Mae has now aligned the eligibility of high-balance loans with their standard eligibility requirements with LTV, CLTV and HCLTV ratios up to a maximum of 95%. Some of the notable changes include: the 5% minimum borrower contribution no longer applies on one-unit principal residence transactions with LTV ratios greater than 80%, field reviews of appraisals no longer required for loan amounts greater than $625,500 with an LTV, CLTV or HCLTV greater than 80%, appraisals no longer need to include two comp sales from outside the project when a loan is secured by a condo unit.
- Non-occupant Borrower Policies in DU – previously, DU only considered the credit and assets of non-occupant borrowers. Now, their income and liabilities will also be considered on all principal residence mortgage transactions – including 2-4 unit properties. The DTI ratio will be based on the income and liabilities of all borrowers on such transactions.
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Hopefully, these changes, already implemented by Fannie Mae, will result in more mortgage transactions being originated in the coming months – especially to lower income borrowers.