Flush with new cash to buy up Mortgage Backed Securities, Fannie Mae has released new guidelines when it comes to credit score, LTV and prior foreclosure standards for borrowers. While my presumptive thought was that they would tighten the screws across the board, Fannie is actually expanding approval criteria in certain instances.
As stated, this is a bit of a surprise as I expected a reflexive credit choke out for a consumer trying to get a conforming loan going forward. Instead the guidelines appear to represent a measured increase in pricing adjustment guidelines. In other words, FNMA didn’t yank the carpet out from underneath everyone, they just built in cost in the form of higher pricing to consumers (thus higher yield to investors).
In a nut shell, conforming mortgage programs that deviate from the very straight and narrow (credit scores below 660, LTV’s above 80%, less than ‘full-doc’ income and asset) just got more expensive.
A few other highlights:
Consumers with prior foreclosures will be subjected to higher qualification standards, a five year moratorium will be required to qualify for a conforming loan with a prior property repossession on record instead of four. A 680 credit score and 10% down payment will also be required.
A 60 day mortgage late on a credit bureau anytime over the past 12 months will not qualify for a conforming loan.
Minimum credit scores for 2 unit properties are 640, 680 for 3-4 unit properties.
Max LTV’s were cut on the high end (95%+) anywhere from 3%-5%. There are still 105% LTV programs available.
Expanded Approval products are now to include the following programs:
Manufactured housing (not mobile homes)
Flexible Mortgages with CLTVs up to 100 percent
Mortgage loans with CLTVs up to 105 percent with an eligible Community Seconds mortgage
30-year fixed-rate IO mortgages (10-year IO period only)
5/1 interest-only ARMs with 2/2/5 caps and 10-year IO period (ARM plans 3515 and 3516)
Three- and four-unit properties
Cash-out refinance transactions on two-unit principal residences
Cash-out refinance transactions on second homes
Cash-out refinance transactions on investment properties
Investment properties with LTVs over 80 percent
Consumers, contact your trusted mortgage professional to see what this means for your specific situation.
Professionals, contact your favorite conforming account executive to see what this means for your business.
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