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Super Contributor
ShanetheMortgageMan
Posts: 7,701
Registered: ‎09-28-2007

Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)

https://www.fanniemae.com/content/release_notes/du-do-release-notes-11162013.pdf has the fine print, but the big changes are:

 

1. No more 3% down purchases.

2. Treatment of short sale & deed-in-lieu of foreclosure reporting by creditors has been clarified.

3. Borrower's who are doing the DU Refi+ (Making Home Affordable) refinance program and have had a prior bankruptcy, foreclosure, deed-in-lieu of foreclosure, or preforeclosure sale will no longer have to abide by the standard waiting period requirements.

 

All of this will be effective on loans run through Fannie Mae's automated underwriting system starting on Nov. 16th 2013 (11/16/13).

 

Note, DU is short for DesktopUnderwriter which is the automated underwriting system that the majority of Fannie Mae loan programs need to be approved through.  Mortgage lenders use DesktopUnderwriter, whereas mortgage brokers normally use DesktopOriginator (DO).  These changes are for loans run through either DU or DO.

 

No more 3% down purchases

Currently with Fannie Mae loan programs you can put down just 3% on a 1-unit primary residence (PMI companies are requiring a 680 score for 3% down though), however come 11/16/13 Fannie Mae will be increasing the required down payment to 5%.  Majority of lenders just need a 620 score for a 5% down payment.

 

Treatment of preforeclosure sale (PFS) (which is a fancy way of saying a short sale) & deed-in-lieu of foreclosure (DIL) reporting by creditors has been clarified

Fannie Mae has been made aware that there are often inconsistencies in the credit data when DIL and PFS events occur, and in an effort to assist borrowers in obtaining a new loan in an appropriate timeframe, DU will be updated to disregard the foreclosure information on the credit report when instructed to do so by the lender on the online loan application.  What this means is that the underwriter (or loan officer) can manually edit the trade line data that is being read by Fannie Mae's DU and indicate that a mortgage that was incorrectly marked as a foreclosure will be correctly viewed as a short sale or deed-in-lieu.  This is huge because many lenders mark short sales or deed-in-lieu's as having been in foreclosure, either by adding a foreclosure remarks code or adding a MOP (Manner of Payment) of 8 or 9.  Now the borrower does not need to contact and argue with the prior lender that they are reporting the information incorrectly and getting them to change the remarks codes or MOP's... the underwriter or loan officer can just override the data and enter in that it was a short sale or deed-in-lieu instead.

 

Borrower's who are doing the DU Refi+ (Making Home Affordable) refinance program and have had a prior bankruptcy, foreclosure, deed-in-lieu of foreclosure, or preforeclosure sale will no longer have to abide by the standard waiting period requirements

Currently if you are trying to refinance under the Making Home Affordable Refinance Program (HARP) and your loan is owned by Fannie Mae, you have two options which are "DU Refi+" (sometimes referred to as DURP) or "Refi+".  Refi+ is really only done through the existing lender, and gives much more flexibility in terms of credit and will actually ignore if there has been a prior bankruptcy, foreclosure, deed-in-lieu or preforeclosure (AKA a short sale) because the loan is manually underwritten.  DU Refi+ is run through Fannie Mae's automated underwriting system (called DesktopUnderwriter, or DU for short) and is the option that a new lender almost always chooses (they also have the option to do Refi+ but since it's manually underwritten I haven't ever seen a new lender willing to do that).  However on 11/16/13 DU Refi+ will also ignore the standard waiting period and re-establishment of credit criteria following a bankruptcy, foreclosure, deed-in-lieu of foreclosure, or preforeclosure sale.  What this means it that currently if someone had a foreclosure 3 years ago, and they wanted to refinance with the HARP program and their loan is owned by Fannie Mae, they would have to use their existing lender since the foreclosure isn't at least 7 years old... however with the new change they would be able to utilize any new lender who is offering the HARP program.  You can use the website https://knowyouroptions.com/loanlookup to see if Fannie Mae currently owns your mortgage.

 

To recap ... a minimum 5% down payment will be needed, it'll be easier for people who have had a prior short sale or deed-in-lieu of foreclosure to qualify to buy a new home with Fannie Mae loan programs, and people whose current mortgages are owned by Fannie Mae and need to utilize the HARP program will have an easier time if they've had a prior foreclosure, bankruptcy, short sale or deed-in-lieu of foreclosure.

Frequent Contributor
frugalQ
Posts: 479
Registered: ‎03-23-2012

Re: Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)

This sucks!! I read an article earlier this week that FM was considering stopping the 3% down, but I thought it would happen in 2014.

If I start my loan process on a new construction home in October (to be completed in 2014) and get approved through DU, will I be this change apply to me?
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Super Contributor
ShanetheMortgageMan
Posts: 7,701
Registered: ‎09-28-2007

Re: Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)

As long as your loan isn't re-run through automated underwriting on or after 11/16/13, but if it's re-run afterwards then the new DU version 9.1 will be used and then you can't go back to the prior version of 9.0.

Frequent Contributor
frugalQ
Posts: 479
Registered: ‎03-23-2012

Re: Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)

Great info!!!

What would be some common examples of having to go back through DU...besides going to another lender?

I'm open to 5% loans, but I also want the option of 3% because then I can consider paying PMI upfront.

Over the last couple of days, ive been finding reasons for not starting in october (in reality its just fear of the unknown). This is definitely gonna light a fire under me to start building.

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Valued Contributor
azguy13
Posts: 5,366
Registered: ‎04-30-2013

Re: Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)

Thanks for the update!




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Super Contributor
ShanetheMortgageMan
Posts: 7,701
Registered: ‎09-28-2007

Re: Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)


frugalQ wrote:
Great info!!!

What would be some common examples of having to go back through DU...besides going to another lender?

I'm open to 5% loans, but I also want the option of 3% because then I can consider paying PMI upfront.


Most common reasons needed to re-run DU would be if asset balances changes (which is almost assured to happen every time a new bank statement comes out) or if the "funds to close" change (which again almost always happens because if you end up closing 1 day later than you originally anticipated that changes the amount of pre-paid interest is less)... we normally always see a final DU re-run at closing.

 

Yeah the 97% LTV option was primarily used for 95% LTV loans but then financing in the single premium for PMI... that has been the biggest gripe among my cohorts about it.

Frequent Contributor
frugalQ
Posts: 479
Registered: ‎03-23-2012

Re: Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)

ugh....

 

so, i'm pretty much dead in the water since they will surely re-run my file through DU.....unless I try and find an existing home and shoot for a quick close.

 

This is such a bummer!

 

Thank you so much for clarifying!

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Super Contributor
ShanetheMortgageMan
Posts: 7,701
Registered: ‎09-28-2007

Re: Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)

Yeah it's basically a head's up for people in those situations that they need to close by then.  Your alternative is FHA and 3.5% down, but if your credit is good conventional is the better option.

Frequent Contributor
basballguy
Posts: 360
Registered: ‎02-20-2008

Re: Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)

this is pretty huge. 

 

I was gonna do the conventional 97 as a fallback if USDA said i made too much.  I think this caters more to people rebuilding credit now. 

 

Makes me wonder if they're going to make any further changes to FHA. 


Frequent Contributor
frugalQ
Posts: 479
Registered: ‎03-23-2012

Re: Big Fannie Mae Guideline Changes (short sales, DU Refi+ Making Home Affordable, no more 3% down)

Yeah...I'm still going conventional, I'm just frustrated I won't have the 3% flexible option available.

Oh well, such is life.
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