Fannie Mae and Freddie Mac

New Rules for Fannie Mae Loans

Aug 28, 2009 - Borrowers looking to obtain a home loan through Fannie Mae lenders will have new guidelines to meet beginning Tuesday, September 1.

With the new rules, the first major underwriting update since April of this year, the process for being approved for a home loan could be more difficult. While the changes are geared towards thwarting fraud and protecting homeowners, borrowers may have more hoops to jump through in the process.

The new rules center on thoroughly establishing income for home buyers, and verifying information through various means. The updates include the following:

  • Families relocating for a new home cannot use the "trailing" spouse's projected income as part of the total
  • Income from tips must be documented and verified
  • Lenders must call employers to check employment
  • Lenders must verify tax transcripts against IRS records
  • Stock options are no longer eligible for "reserves." In addition, only 70% of stock, bond and mutual values can be used as reserves, along with 60% of retirement assets.

For commercial or investment buyers of 2-unit homes, new minimum FICO rules apply, as well as new requirements for larger down payments and equity values.

Borrowers wishing to utilize existing Fannie Mae rules and avoid the new strictures must apply for their mortgage by Monday, August 31.
The new rules for Fannie Mae loans come at an interesting time for the governmt-sponsored entity charged with purchasing mortgages and increasing market liquidenity. After a tumultuous few months, in which the portfolio value plummeted, business at the organization is recovering. The total value of the company's portfolio remains down nearly one-fifth, however, and the total mortgage value declined at an annualized rate of 18.2%.

At the same time, the government's other sponsored enterprise with a similar mission, Freddie Mac, is also reporting major losses. The organization's mortgage investment portfolio shrank at an annualized pace of 44.5% in July, and delinquencies on guaranteed loans accelerated.


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