Fannie Mae New Rules for Delaware Home Buyers January 2014
Fannie Mae New Rules for Delaware Home Buyers Effective January 2014
Fannie Mae released an update to its Selling Guide SEL-2013-06 which will be effective January 10, 2014 with the update to automated underwriting system DU version 9.1. The update makes the following changes to conventional mortgage loans sold to Fannie Mae:
- No longer accept mortgages with terms greater than 30 years (So no more 40-year mortgages)
- No longer accept mortgages with an interest only option
- Adjustable Rate Mortgages (ARMs) that are 7 years fixed or 10 years fixed will need to be qualified at higher of note rate or fully indexed rate whichever is higher
- No longer allow Loan-to-Value (LTV) over 95% (So no more 97% LTV Loans!!!)
- Will force Lenders to purchase back loans that can be proved to fail the ATR (Ability to Repay) test
The 97% Loan that is no longer eligible includes the My Community Mortgage programs and the HFA programs. The ATR test is the biggest change that most people will not directly see as it will affect how lenders underwrite loans after January 10, 2014. The new rule says that if a loan defaults at any time during the 30-year term of the loan, Fannie Mae can review the loan and if determines the lender failed to adequately document the borrower’s ability to repay then the lender must indemnify Fannie Mae for the complete loss. The big problem is Fannie Mae has not clearly defined what a lender is supposed to do in order to document the borrower’s Ability to Repay a loan. This means Fannie Mae can subjectively decide if a lender passes the ATR test when a loan goes bad.
