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.
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.