Written By: Stacey Sprain, Op-Ed Writer
I usually tend to lean toward writing articles on government loans but this week I thought I’d step over the conventional side of things because there are several items of interest that have been announced by Fannie Mae recently and also earlier this year.
Though we keep hearing from the President that the economy is slowly bouncing back, it sure makes you wonder when you look at how much further the agencies continue tightening up. Fannie Mae’s Announcement 09-19, dated June 30th, is just another hint that there is still room left out there for more rules and regulations to restrict our ability to lend.
There are several BIG changes mentioned in this recently issued bulletin, all of which Fannie Mae states are to be effective and in full-force by September 1st:
1. Acceptable Age of Credit Documents has changed from 120 days down to only 90 days for existing construction and from 180 days down to 120 days for newly constructed property files. This means that processors and underwriters need to be aware of the documentation dates in the loan file and need to keep close track of when the credit report, employment, income and asset documentation expires.
2. Borrowers can now use a credit card to cover charges like lock-in fees, origination fees, commitment fees, credit report fees and appraisal fees totaling a maximum of 2% of the loan amount if the following are verified:
--- Borrower must have verified liquid funds to cover the total amount charged to a revolving credit card, OR
--- Borrower must be qualified with the credit card repayment based on the updated total credit card balance including the charged amount to cover allowable loan costs.
3. Home equity lines of credit (helocs) are not allowed as secondary financing on the Flexible mortgage and MyCommunity Mortgage (MCM) products.
4. Fannie Mae is now REQUIRING that each borrower sign and date IRS from 4506-t at the time of both loan application and the time of closing. They are also strongly RECOMMENDING that the executed form be processed to request tax return transcripts for each borrower.
Need FHA Training? CLICK HERE: http://www.FHA-Classes.org
Lenders are all over this one and have already been issuing their own policies requiring tax transcripts for all loan applicants. I expect we will see this eventually across the board. I anticipate a few lenders will hold out as long as they can without announcing the requirement in order to corner the market but eventually I definitely expect we’ll see this made as a standard requirement.
Personally I think that the best thing you can do out there is be proactive about this one. The sooner you work the tax transcripts into your daily work flow, the further ahead you will be when it eventually becomes a standard. Don’t wait to scramble at the last minute on transcript requirements- Get familiar with vendors who can offer you the service as soon as possible and get written ordering procedures in place for your staff.
5. Fannie has now added specifics to the Selling Guide on the use of tip
income by stating that it can be used in qualifying if we can verify a two year history of the borrower earning tips and the employer verifies that it is likely to continue.
6. One of the oldest and dearest policies is actually being removed- Fannie Mae is no longer allowing trailing spouse or wage earner income to be used in qualifying because it’s considered as projected income. With the nation’s unemployment rate continuing to rise, they must have concluded that the risk by far outweighs the benefits of allowing this type of income in qualifying.
7. Fannie has tightened the policy on verbal verifications of employment to state that we must now provide a verbal VOE within 10 calendar days of the settlement date for standard employment and evidence of business existence within 30 days for self-employed persons. If borrower is employed in the military, a military leave and earnings statement (LES) dated within 30 days of settlement may be accepted in lieu of a verbal VOE.
8. Fannie has updated the policy on utilization of stocks, bonds, mutual funds and retirement accounts to state that you may use only 70% of the value for the first three sources of assets and may only use 60% of the total vested value for retirement funds.
Note that stock options and non-vested restricted stock can no longer be used as reserve.
There are a couple of other of miscellaneous policy changes mentioned in the bulletin so I highly recommend reading through the entire content of Announcement 09-19 because these are very important changes! You will see many lenders implementing a majority of these changes in advance of the September 1st deadline so be prepared!
Need FHA Training? CLICK HERE: http://www.FHA-Classes.org
About The Author
Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution.
