Rules Get looser with Fannie…

Here is some great news.  Most of you know that Fannie Mae, Freddie Mac and now FHA have raised the loan limits in Monterey County to the following:

  • 1 unit $529k
  • 2 units $677,200
  • 3 units $818,600
  • 4 units $1,017,300

……..………so yes, a 3-plex in Monterey County that sells for $1,091,466 with a 25% down payment and new loan of $818,600 is a “Conforming Loan” (NOT a jumbo loan). 

But now Fannie has also gotten with the program and allows non-occupant co-borrowers (that’s like when mom and dad want to co-sign) instead of making the occupant qualify on their own.  Time for your buyers to a call their parents……………

Cliff Notes Version: 

  • Fannie Mae Blended Ratios now ok
  • C/O on High Balance no longer limited to 60%

Long Version:

Non-occupant Borrower Policies in Desktop Underwriter

Historically, when considering non-occupant borrowers on a mortgage loan, DU only considered the credit and assets of such borrowers, and not the income or liabilities.

In an effort to simplify Fannie Mae’s underwriting requirements and provide greater access to mortgage credit, DU will be updated to consider the income and liabilities of all borrowers on all principal residence mortgage transactions, including two- to four-unit properties. No separate calculation of the DTI ratio for the occupying borrower will be required, as the DTI ratio calculation will be based on the income and liabilities of all borrowers on the mortgage loan. 

High-Balance Mortgage Loan Eligibility

Fannie Mae has aligned the eligibility of high-balance mortgage loans with Fannie Mae’s standard eligibility requirements with LTV, CLTV, and HCLTV ratios up to a maximum of 95%. Many of the policy overlays that previously applied only to high-balance loans have been removed and a new policy has been implemented requiring all high-balance loans to be underwritten through DU.

Notable policy revisions with this Guide update include:

  • 5% minimum borrower contribution no longer applies, allowing all borrowers to be eligible to use gifts, grants, and Community Seconds® to fund all required down payment and closing costs on one-unit principal residence transactions with LTV ratios greater than 80%;
  • field review of property requirement for loan amounts greater than $625,500 with an LTV, CLTV, or HCLTV ratio greater than 80% has been removed;
  • appraisals no longer need to include two comparable sales from outside of the subject project when the loan is secured by a condominium; and
  • LTV, CLTV, and HCLTV ratio maximums for borrowers with 5-10 financed properties align with the requirements for loans subject to the general loan limits.

The existing high-balance loan policy overlays that remain in place include:

  • a field review is required for properties valued at $1,000,000 or more with an LTV, CLTV, or HCLTV ratio greater than 75%; and
  • all borrowers must have traditional credit. 

Effective Date

This update will be effective with DU Version 9.3 the weekend of December 12, 2015