Mortgage Talking Points

Borrowers are in “financal purgatory” util one minute AFTER closing because Fannie just announced that mortgage loans may have to re-underwritten if the back end ratio exceeds 45% OR (yes, it’s an OR) the back end ratio increases by 3%  (or more) from the original ratio. 

Yeah, what that means is that even if they had a 38% total debt-to-income ratio, they added new debt (or income was reduced for some reason), and the new ratio is 41%, the new loan/loss of income must be documented and the loan must be re-underwritten prior to closing. 

While this “officially” does not go into effect until 12-1-10, Fannie wants lenders to start implementing now. Consider being pro-active and warn your clients not to spend one single dime–or at least let you know if any, and I mean any, changes to their income or debt.

On 9-1-10, it becomes official–Fannie (freddie will probably follow) will require appraisers to include interior photos of the Kitchen, all bathrooms, main living area, physical deterioration areas, remodeling projects or incomplete restorations! 

Nope, they will not make an adjustment for “clutter” (or they are not supposed to anyway) but expect adjustments for renovation projects, worn carpet/floors, holes in walls, water damage in bathrooms, etc. 

This change is big and interior issues can no longer be “ignored”.  More info www.MortgageCurrentcy.com

June 1 is when Fannie/Freddie will require that you check to make sure that your clients have not incurred any new debts…or if they have a lower credit score, what is the reason is for the lower score.  I found that Informative Research just launced a service called “PreCloseCredit” which offers a comparison and a summary of any changes from the initial credit report.  Might want to check it out (no, i don’t have any affiliation with them) just thought it might help you out.  http://www.informativeresearch.com/

Fannie never had an official policy about how they would treat people who had a short sale or a deed-in-lieu of foreclosure in their past.  Well, SEL 2010-05 spells it out for you.  Basically, they have 3 waiting options and 3 down payment options. 1. 2 year waiting time and 20% down; 2. 4 year wait and 10% down; 3. 7 year waiting time and 5% down.  Effective 7-1-10.

Extenuting Circumstance Rule (for those who has a pre-foreclosure):  Job loss, divorce, decrease in income, increase in debts - 2-years and 10%,

Let’s talk about re-establishing credit after a short sale or deed-in-lieu.  In addition to these below, the minimum credit scores must be met (varies between lenders)

1. Waiting period is defined as from the date of the short-sale/deed,  to the date of application

2. Must receive automated underwriting approval

3. Establish “traditional” credit thru banks, finance and credit cards

Real Estate Agents should let their clients (who have or are selling home with short-sale) of the waiting time periods too.

This change is HUGE and expect more closing delays!  Okay, so what it really means is that after the loan is underwritten, but before funding, the file will need to be audited.  The underwriter has given you one set of conditions and you may get a 2nd set of conditions from QC.   So, who’s going to underwrite the loan a second time?  The other bigger here is that a “defects” report (for each individual loan file) must be submitted to management on a monthly basis. 

Effective July 1, lenders are required to:

1. Have a written procedure for approval or 3rd party originators (Brokers/Correspondents, etc)

2. New Requirements for QC on the PRE-Funding

3. New Requriements for QC Audit Review Process

Loans that will be considered HIGH RISK and subject to a higher percentage of pre-audit are:  90%LVT and higher; High-risk credit scores; investment properties; cash-out refis; 3rd party originations; loans originated by new employees! 

Mortgage Talking Points(r) for real estate agents:  “Don’t Close Late–Don’t Close Ugly”  about the rules that affect closing dates on purchase contracts! 

http://www.mortgagecurrentcy.com/members/mortgage-talking-points.php

Fannie, Freddie, FHA and VA have made significant changes to the condo approval process–both for existing and new construction. 

www.MortgageCurrentcy.com (see Charts/Checklist Toolbar) has created a handy comparison chart to share with your real estate agents!  It will help determine what type of financing is eligible for which type of project. 

Are you lending in a UDSA area?  USDA says that they will accept ANY condo project that is approved by ANY agency–but the location of the condo has to qualify too.