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New Fannie Mae Mortgage Loan Guidelines Contain Some Good News And Some Bad News For Marginal Credit

I got this announcement in an email from a lender. =>Fannie Mae Guidelines contain some good news and some bad news for marginal credit borrowers. These changes will take effect May 19th


Seems as though Fannie Mae may be getting a little more conservative on their approvals for the High Risk, High LTV/CLTV loans. What does that mean? Quite simply, some high risk loans will be getting approvals with 'Levels' attached. Which means that they will be paying .5% to 1.5% higher rates than a low risk client. I see this as prudent and very fair for the borrowers. These levels have always existed, so that is nothing new. But the higher risk stuff will be getting 'leveled' more often now.


Another announcement, and this is a biggie, is that they do not require collections be paid regardless of amounts. Remember the "collections allowed up to $5,000"? They will now allow unlimited collections that do not affect title. So, the guy who has a 6yr old chargeoff for $5,500 can get into a conforming loan without paying off his collection. Fannie Mae used to require all collection paid if they added up to over $5,000. The presence of collections will still go into the risk analysis of the loan.


I could speculate on why these changes are being made..... but it would only be a guess. Who knows what all goes into their risk analysis thinking. But I suspect that Fannie is learning what we knew all along. Some borrowers with old collections can still pay their mortgages on time. And that an arbitrary $5K limit did not make sense. The net result is going to be a little higher rate for the 100% loans as a result of the Expanded Level Approval. And some folks with great recent credit may be able to get into conforming rates regardless of old collections.


Is your loan officer running EVERY FILE through Automated Underwriting? They should be..... because a lot of these people in subprime loans probably would have qualified for something better..... a Conforming Loan.


Tom Burris


DallasLoanGuy.com
Dallas, TX
Texas Home Loans


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