Written By: Frankie Lacy, Op-Ed Writer
Appraisal Quality
As of Lender Letter LL-2013-10 dated December 10, 2013, Fannie Mae has instituted an appraisal quality review program. Fannie Mae will identify inaccuracies in appraisal reports and communicate with appraisers who display a pattern of consistently reporting unacceptable data. Fannie Mae will initially report their findings as a tool for training and educational purposes. Appraisers who require additional training for minor errors will be monitored to assess their improvement.
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Any appraisers who have committed intentional misrepresentation or prove incompetent in their work will be place on an exclusionary list. Some appraisers will be required to submit 100% of their reports to Fannie Mae for a second level review. In addition to appraisers, Fannie Mae will also be monitoring lenders who consistently submit loans for purchase using unacceptable appraisal reports.
2014 Loan Limits
The general loan limits have not changed from 2013 to 2014:
• $417,000 for single family
• $533,850 for 2 units
• $645,300 for 3 units
• $801,950 for 4 units
However, 2014 high-cost area loan limits have increased for 18 counties. The list of high-cost area counties can be found in Lender Letter LL-2013-09. In addition, DU for government loans was updated during the weekend of January 18, 2014 to support the VA 2014 county loan limit changes. The details of this release can be found in the following DU release notice: DU for Government Loans Release Notes January 2014 Release.
Increased Reserve Requirement for Higher Debt Ratios
Those who underwrite conventional loans using DU findings may have already noticed a big change in the reserve requirements for loans with debt ratios in the 45% range. Over the last two weeks, I have underwritten several loans that were 80% LTV, primary residence purchases with 45% debt ratios. As a result of the higher ratios, DU required twelve months reserves.
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A few of my underwriting colleagues and I tested several loans to see if the heightened reserve requirement was FICO or property type driven as well. At this time, it appears the reserve requirement was strictly debt ratio driven. As a result, keep an eye on loans with higher debt ratios as your customer may be subject to much steeper reserve requirements. I am sure as we move further into the year, Fannie Mae and Freddie Mac will continue to tweak their AUS’s in response to the CFPB’s Ability to Repay and Qualified Mortgage rules.
About The Author
Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.
