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

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

ShanetheMortgageMan — Fri, 23 Aug 2013 01:41:56 GMT

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.

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

frugalQ — Fri, 23 Aug 2013 02:21:57 GMT

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?

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

ShanetheMortgageMan — Fri, 23 Aug 2013 02:25:42 GMT

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.

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

frugalQ — Fri, 23 Aug 2013 10:57:00 GMT

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.

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

azguy13 — Fri, 23 Aug 2013 11:05:26 GMT

Thanks for the update!

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

ShanetheMortgageMan — Fri, 23 Aug 2013 15:46:14 GMT

@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.

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

frugalQ — Fri, 23 Aug 2013 17:23:21 GMT

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!

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

ShanetheMortgageMan — Fri, 23 Aug 2013 17:26:07 GMT

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.

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

basballguy — Fri, 23 Aug 2013 23:13:06 GMT

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.

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

frugalQ — Sat, 24 Aug 2013 01:39:48 GMT

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

Oh well, such is life.

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

frugalQ — Sat, 24 Aug 2013 01:41:25 GMT

It seems like they are tightening the reins even more. I also wonder what's the next ax to fall.

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

ShanetheMortgageMan — Sat, 24 Aug 2013 03:52:59 GMT

Just in the down payment department - the guidelines overall will allow more people to qualify. The difference between 3% & 5% down isn't that much. People said the same thing when Fannie Mae eliminated their 100% financing program, then they had to put 3% down... just makes people save up a little more. Honestly not everyone knew about the 3% down Fannie Mae option either, majority of people just assumed 5% down was required on conventional.

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

frugalQ — Sat, 24 Aug 2013 13:03:40 GMT

I agree that not many people knew about it. However, going from 3% to 5% is a nice chunk of change when going for a 400k mortgage....as in my case.

We have the $$$ for the 5% down without issue. I was just trying to be a little creative to be able to not have a monthly PMI and not have to totally drain our savings. Welp.....that's all gone now.

I always feel that this process is being made harder and harder for people who have stronger files.

Why couldn't they just tighten the rules for 3% down....like you can't have a SS FC or DIL for 7 years or something to qualify? Dag, don't just get rid of the product all together!!

I am so annoyed!!! I get helping those who had past problems, but don't penalize those of us who were blessed to weather the storm.

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

frugalQ — Sat, 24 Aug 2013 13:07:13 GMT

Believe me, my family an I went through issues too because my DH was laid off 3 days before Christmas in 2008, and it was impossible for him to find a job.

So, im not downing anyone who went through issues. I did too. I'm just venting!!

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

ShanetheMortgageMan — Sat, 24 Aug 2013 17:20:04 GMT

I agree it stinks, it was one of my biggest niche products I was able to offer my clients. Freddie Mac did away with their program years ago, so it's not too surprising Fannie Mae finally eliminated theirs too. Yeah another $8k down payment isn't fun to save for, but you will get a little better interest rate at 95% LTV than 97% LTV to make up for it.

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

frugalQ — Sat, 24 Aug 2013 18:20:17 GMT

Yeah,

We'll see what our options are come October when we do our loan app.

I learn so much from this site. I'm sure are a few LO's out there whom I could school. LOL

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

ShanetheMortgageMan — Sat, 24 Aug 2013 21:13:00 GMT

Most LO's don't know half the stuff that is discussed here. There is a loan officer forum I visit and I'm amazed as some of the questions they ask - of course everyone has to learn somehow but you'd think someone in the industry could at least look through the provided guidelines.

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

boober — Thu, 05 Sep 2013 22:47:49 GMT

Can someone please tell me what and how these new changes will affect those looking to refi under HARP?

I qualify for HARP, my home is with Fannie Mae, but my DTI is right around 70% or so, I'm paying it all down, and by around February of 2014, my DTI will be around 45%, but it appears as though that won't matter since all loans are being capped out at 43%?!?!

Will all my efforts be for naught????

Will I have to find some way to pay down that extra 2% to get myself down to around 43%?

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

Anonymous — Wed, 11 Sep 2013 13:08:42 GMT

Here's our situation.

We went under ratification yesterday, and preapproved for the 97% LTV. Our sellers wanted 60 days to close, which puts us at a Nov 14th closing date. Our loan officer said we should go forward, but that their investors may pull the program before Nov 16th.

Should we insist on moving the closing date up, and by how much?

Thanks!

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

StartingOver10 — Wed, 11 Sep 2013 22:04:28 GMT

Speaking as a Realtor and not a loan officer I would say move your date so you close before the program changes. JMHO.