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September & October 2015 will go down as an important period of time for the implementation of many substantial credit and compliance policy & procedural changes for the mortgage lending industry.
Many of our past LoanLogics Blogs have focused on the roll-out of FHA’s 4000.1 Handbook and the numerous policy changes that became effective for transactions obtaining their FHA case number on & after September 14, 2015. Also, on October 3, 2015, the new TRID Rules & Forms become effective for transactions for which an application is received on or after that date.
In their 2015-16 Bulletin dated September 16, 2015, Freddie Mac announced some underwriting policy changes that will become effective in the next few months.
Outlined below is a summary of most of the major changes:
- For transactions secured by Primary Residences and that have LTVs greater than 80% – Freddie Mac will no longer require a minimum 5% contribution from the Borrower’s Personal Funds if receiving a gift from a Related Person or an Employer Assisted Homeownership Benefit (effective for mortgages with settlement dates Oct. 1, 2015).
- Freddie Mac will be removing (effective Oct. 1, 2015) the 120-day seasoning requirement for a “no cash-out” refinance mortgage, when the mortgage being refinanced is a purchase money transaction.
- On cash-out refinances – Freddie Mac currently requires at least one Borrower to have been on the Title to the subject property for at least 6 months prior to the Note date of the mortgage, with certain exceptions. These exceptions are being revised as follows:
- no borrower is required to be on Title for at least 6 months prior to the Note date if at least one Borrower on the cash-out transaction either inherited or was legally awarded the subject property and
- in a case where a Settlement/Closing Disclosure Statement is required – a trustee’s deed is acceptable if a Settlement/Closing Disclosure Statement was not used for the purchase transaction.
- Effective Oct. 1, 2015, Freddie Mac is removing the requirement that the Seller must manually apply the requirements for Manually Underwritten Mortgages with significant or derogatory credit information to Loan Prospector Accept and A-minus Mortgages with evidence of a short sale on a credit report or elsewhere in the file.
- For Mortgages with Settlement Dates on or after Oct. 26, 2015 – Freddie Mac will be eliminating the additional reserves and rental income requirements for mortgages on which the Borrower’s current Primary Residence is:
- pending sale but the sale will not close prior to closing the new mortgage
- being converted to a second home and
- being converted to an Investment property.
Loading ...Stay tuned to LoanLogics Blogs and Newsletters to obtain up-to-date information on any substantive policy changes being implemented by the Agencies & GSEs – especially during this two-month time frame.
As the saying goes – the only thing (in the mortgage business) that is constant is change!
